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Micro and Small Enterprises (MSEs) in developing countries are typically considered to be severely credit constrained. Additionally, high business risks may partly explain why capital stocks of MSEs remain low. This article analyzes the determinants of capital stocks of MSEs in poor economies focusing on credit constraints and risk. The analysis is based on a unique, albeit cross sectional but backward looking, micro data set on MSEs covering the economic capitals of seven West-African countries. The main result is that capital market imperfections indeed seem to explain an important part of the variation in capital stocks in the early lifetime of MSEs. Furthermore, the analyses show that risk plays a key role for capital accumulation. Risk-averse individuals seem to adjust their initially low capital stocks upwards when enterprises grow older. MSEs in risky activities owned by wealthy individuals even seem to over-invest when they start their business and adjust capital stocks downwards subsequently. As other firms simultaneously suffer from capital shortages, such behavior may imply large inefficiencies.

Access to Finance --- Capacity Building --- Capital Costs --- Capital Markets --- Capital Requirements --- Collateral --- Debt Markets --- Developing Countries --- Economic Development --- Entrepreneurs --- Expenditures --- Finance and Financial Sector Development --- Gdp --- Human Capital --- Insurance --- Job Creation --- Macroeconomics and Economic Growth --- Market Economy --- Microcredit --- Microenterprises --- Moneylenders --- Moral Hazard --- Political Economy --- Private Sector Development --- Profitability --- Purchasing Power --- Purchasing Power Parity --- Risk Aversion --- Savings --- Small and Medium Size Enterprises

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The informal sector is typically characterized as being very heterogeneous and possibly composed of two clearly distinct segments, sometimes called the lower and upper tier. However, empirical evidence shows that even among lower tier entrepreneur's profitability can be quite high. The authors combine these findings and develop an innovative approach to identify what is called constrained gazelles, next to the well-known survivalists in the lower tier and growth-oriented top-performers in the upper tier. The sample of informal entrepreneurs in seven West-African countries allows linking the relative size of these three groups to the structural and macroeconomic environment in these countries.

Access to Finance --- Accounting --- Agriculture --- Business Development --- Business Environment --- Capacity Building --- Discrimination --- Economic Development --- Economic theory & Research --- Finance and Financial Sector Development --- Financial Literacy --- Financial Services --- Gdp --- Gender --- Gender Issues --- Inequality --- Insurance --- Job Creation --- Labor Market --- Macroeconomics and Economic Growth --- Marketing --- Microenterprises --- Political Economy --- Private Sector Development --- Productivity --- Profitability --- Risk Aversion --- Savings --- Secondary Education --- Social Networks

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More than 1.1 billion people in developing countries are lacking access to electricity. Based on the assumption that electricity is a prerequisite for human development, the United Nations has proclaimed the goal of providing electricity to all by 2030. In recent years, Pico-Photovoltaic kits have become a low-cost alternative to investment intensive grid electrification. Using a randomized controlled trial, the paper examines uptake and impacts of a simple Pico-Photovoltaic kit that barely exceeds the modern energy benchmark defined by the United Nations. The authors find significant positive effects on household energy expenditures and some indication for effects on health, domestic productivity, and on the environment. Since only parts of these effects are internalized, underinvestment into the technology is likely. In addition, our data show that adoption will be impeded by affordability, suggesting that policy would have to consider more direct promotion strategies such as subsidies or financing schemes to reach the UN goal.

Household Technology Adoption --- Household Welfare --- Randomized Controlled Trial --- Sustainable Energy for All (Se4All)

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This paper investigates the dynamics of the informal sector in Madagascar during a period of fragile growth. Overall, the behavior of informal firms in terms of earnings, employment and capital accumulation points to a degree of heterogeneity which goes beyond a simple dualistic model and even a more refined model that would distinguish between an upper entrepreneurial and a lower subsistence tier within the informal sector. However, in line with the dualistic model, the informal sector indeed fulfills a labor absorbing function in times of crisis. During the growth period authors see capital accumulation in most of the sectors and lots of evidence that households expand their activities. However, this happens mainly through the creation of new firms instead of the expansion of existing ones, which is consistent with much higher returns at very low levels of capital. More rapid expansion can be observed in sectors that operate with lower capital intensity, which is also consistent with risk or credit constraints as major deterrents to expansion. While there is some indication that total factor productivity increased over time, returns to capital and labor where not higher at the end of the observation period than at the beginning. Returns are also rather low at high levels of capital. These findings point to a limited growth potential of the informal sector as a whole. The heterogeneity in capital returns hints at large inefficiencies in allocating capital across informal firms.

Access to Finance --- Capacity Building --- Capital Costs --- Capital Markets --- Capital Requirements --- Collateral --- Debt Markets --- Developing Countries --- Economic Conditions and Volatility --- Economic Development --- Economic theory & Research --- Entrepreneurs --- Expenditures --- Finance and Financial Sector Development --- Gdp --- Human Capital --- Insurance --- Job Creation --- Macroeconomics and Economic Growth --- Market Economy --- Microcredit --- Microenterprises --- Moneylenders --- Moral Hazard --- Political Economy --- Private Sector Development --- Profitability --- Purchasing Power --- Purchasing Power Parity --- Risk Aversion --- Savings