5: Firms, Trade and Markets

Chaired by Dr Naved Hamid (Resident Director, IGC Pakistan), the session on Firm Capabilities started with Dr Eric Verhoogen (Columbia U) presenting his work on “Technology Adoption among soccer ball manufacturers in Pakistan”. This original project followed the adoption and diffusion of a cost-saving new technology, shedding new light on the barriers to innovation. Evidence shows that not only managers, but also employees might resist the adoption of new technologies, generating the need for pro-innovation incentives and organizational reforms.

Christopher Woodruff (University of Warwick) takes the podium and reviews the evidence on productivity in the garment sector across the world. Surprisingly, substantial differences in productivity exist not only across and within countries, but also between production lines in the same firm. Motivated by this evidence, his most recent research project looked at middle-management’s human capital in Bangladeshi garment sector. With 80% of operators being female, this sector counts only few female supervisors and a training programme was designed to close this gap. As a result, female supervisors were reported to be as efficient as male ones and reduced absenteeism within their teams. Evidence on low promotion rates for female workers, however, shows that this productive organizational change still faces some obstacles.

Our third presenter, Kunal Sen (University of Manchester) extends the debate on firms’ capabilities by looking at financial access in India. While most of the studies on this topic look at the formal sector, Dr. Sen exploited a database of almost 300,000 informal micro enterprises to look at how the lack of finance influences the ability of these family businesses to evolve into more structured and larger businesses. The evidence presented shows that policies aimed at increasing financial access could yield large benefits in terms of poverty reduction and employment by allowing this sector to grow sensibly in terms of businesses’ size and productivity.

Dilip Mookherjee (Boston University) completes the picture by presenting a new approach to microfinance for poor farmers. Traditional microfinance and group based lending (GBL) are characterised by rates of interest and repayment schedules that, in practice, hamper the access by many poor farmers. For this reason, a special lending scheme was designed to meet the needs of this sector and these loans were rolled out with two modalities. The first was a classic GBL while the second used local intermediaries, traders and lender, to recommend individual applicants. The second scheme resulted in substantially higher take-up and repayment rates, as well as increases in productivity, showing that innovative ideas are crucial to ameliorate the financial access constraints and rural poverty.

Mr. Azfar Hasan, CEO of Matrix Sourcing, concludes the session by exploring constraints faced by the Pakistani private sector and future research opportunities. Among the topics discussed we find lack of diversification, sluggish innovation and the importance of trade associations.

By Andrea Smurra, Country Economist, IGC Myanmar