Research

South Asia’s Path to Resilient Growth highlights the remarkable development progress in South Asia and how the region can advance in the aftermath of the COVID-19 pandemic. Steps include a renewed push toward greater trade and financial openness, while responding proactively to the distributional impact and dislocation associated with this structural transformation. Promoting a green and digital recovery remains important. The book explores ways to accelerate the income convergence process in the region, leveraging on the still-large potential demographic dividend in most of the countries. These include greater economic diversification and export sophistication, trade and foreign direct investment liberalization and participation in global value chains amid shifting regional and global conditions, financial development, and investment in human capital.

Digital technologies offer powerful tools that public administrations can leverage on to modernize and improve their operational efficiency. Bangladesh has progressively embraced GovTech solutions over the past decade and has adopted an ambitious digitalization agenda in the 8th Five-Year Plan (FYP). This note discusses Bangladesh’s digitalization advancements and presents empirical evidence in support of GovTech efforts to improve tax revenue performance, as well as health and education outcomes.

Building on the success of the Savings Groups, SaveAct has introduced Enterprise Focus Groups which enable group members to find economically sound ways of re-investing their savings. This paper aims to understand if the Enterprise Development Project is meeting its targeted objectives. It discusses the factors that affect the ability of members to earn higher incomes from enterprise and run successful enterprises. It also delves into a few key problems identifed and suggests recommendations.

Access to microcredit has been shown to generate only modest average benefits for recipient households.  We study whether other financial market frictions -- in particular, lack of access to a safe place to save – might limit credit’s benefits. Working with Kenyan farmers, we cross-randomize access to a simple savings product with a harvest-time loan.  Among farmers offered a loan, the additional offer of a savings lockbox increased farm investment by 11% and household consumption by 7%. Results suggest that financial market frictions can interact in important ways and that multifaceted financial access programs might unlock dynamic household gains.

In an era of rapid digitalization in low and middle-income countries, many novel digital technologies are still out of reach for informal micro-firms. Adoption of technology can enable growth and increase productivity for these firms in LMICs. However, adoption remains low for seemingly profitable technologies across varied settings. In this paper, I offer one specific explanation: that high learning costs at onset leads to low adoption of technologies by firms. First, I set up a stylized dynamic model of adoption choice with differential learning costs and show that temporarily subsidizing learning costs leads to a sustained increase in adoption. Second, to test the predictions of my model in the context of micro-firms in India, I offer firms a novel digital technology that overcomes financial management issues that arise due to informality. I implement a randomized field experiment where treatment arms vary in the extent to which learning costs are subsidized. I do this in practice, by varying the durations for which firms are offered handholding on how to use this digital financial technology. I document that a temporary learning subsidy that maximizes initial adoption, leads to significant positive effects on adoption, as well as more intensive use of the digital technology. I also offer evidence that as firms use this digital technology, they significantly improve business practices and learn about the true profitability of their firm. 

Income shocks and lack access to capital challenge the growth, profitability and survival, for women led microenterprises. While many entrepreneurs have access to microcredit, these loans typically come with rigid repayment schedules that often deter entrepreneurs from channelling money into their business. With funding from USAID’s Development Innovation Ventures, we partner with Buzz Women and Yunus Social Business to test the effectiveness of microequity contracts, which are characterized by revenue contingent repayments over a three-year term. Working with women microentrepreneurs, we will explore how microequity contracts affect microenterprise growth. 

Can South Asian countries increase government efficiency by stepping up their digitalization efforts? The digitalization of public finances can help enhance access to services and entitlements, reduce errors and frauds, strengthen procurement procedures. The important policy question that arises is whether e-governments are better at spending their resources more efficiently. This question is explored empirically in this chapter using a broad sample of 180 countries at different stages of GovTech development during the period 2008–2019. In this paper, we estimate the efficiency in public expenditure in the health and education sectors using a stochastic frontier model that controls for relevant socioeconomic variables and other determinants of health and education performance. We find that building on their recent progress, South Asian countries stand to benefit from further GovTech advancements in terms of public finance efficiency in health and education spending efficiency.