Lower Transaction Costs Research Articles

Peer to Peer Lending Syari’ah

The interest of Indonesian people in investing in real sector businesses, particularly MSMEs, is relatively low due to high risks and business uncertainties. Unfortunately, Sharia Financial Institutions have not played an active role in channeling cooperation-based financing. Instead, they have mostly focused on channeling murabahah financing under the buying and selling scheme. However, Sharia P2P Lending can help develop the real sector and have a positive impact on the national economy by reducing bureaucracy and complicated requirements. Sharia P2P Lending is an investment platform in real sector businesses that benefits business actors and investors. The use of Sharia P2P Lending can encourage the public to invest in the real sector because of the following reasons: (1) it provides a safe investment with higher returns compared to conventional investments, (2) it offers access to invest in the real sector with relatively small capital, (3) it allows investors to choose business actors and monitor their investment performance, (4) it has relatively low transaction costs and is easy to conduct transactions online, and (5) it provides protection through risk management and financing management policies carried out by the company.

A REVIEW OF A FINTECH FINANCING PLATFORM: POTENTIAL AND CHALLENGES OF ISLAMIC CROWDFUNDING TO ENTREPRENEURS

The emergence of financial technology, known as fintech, has altered the landscape of traditional financial institutions. Broadly defined, fintech is the application of technology in finance. Conventional and Islamic crowdfunding platforms are fintech innovations that offer a great alternative to traditional financial lenders like banks. This paper aims to provide insights regarding crowdfunding as an alternative fundraising source for entrepreneurs, especially start-ups, who usually face financial challenges. This paper uses a deskresearch methodology to review the extant literature on crowdfunding as an entrepreneur's funding source. Findings show that crowdfunding adoption is rapidly increasing and is embraced by many underserved entrepreneurs. As a promising alternative, it offers excellent potential by providing services at a lower transaction cost and greater efficiency. It also covers a broader market penetration. Islamic crowdfunding benefits even more, as the nature of Islamic financing helps to curb excessive credit expansion, thus helpingto stabilise the economy. The application and importance of Islamic crowdfunding are in line with the three classes of Maqasid-Shariah, which are darūrāt (necessities), ḥājīyāt (needs), and taḥsīnīyāt (luxuries). Nevertheless, crowdfunding is not without problems and challenges. Major problems usually arise from regulatory and fraud issues, such as stolen ideas and lack of proper regulations. This paper may help create awareness about crowdfunding, its potential, and its challenges to entrepreneurs. The findings may alsoserve as reference points for future researchers to examine further the issues and challenges in the crowdfunding industry, especially Islamic crowdfunding, in promoting competency and sustainability for entrepreneurs' interests.

Firm innovation and generalized trust as a regional resource

Generalized trust represents an important regional resource for a firm. It increases human capital, fosters frequent interaction and information sharing, and lowers transaction costs. We provide empirical evidence on the impact of generalized trust among people on firm innovation in German regions. Our observation period ranges from 2004 to 2018. A trust measure is generated by using survey data from the German Socio-Economic Panel, firm-level data is obtained from the Mannheim Innovation Panel and regional data is retrieved from the INKAR database. We apply a 3-level multilevel model, with yearly observations nested in firms, which are nested in regions. Our results show that the relationship between trust and firm innovation has an inverted U-shape. An increase in trust is particularly beneficial for firms inside regions with very low levels of trust, and in small and medium-sized enterprises, especially those that operate in the doing-using-interacting mode of innovation (DUI) with an emphasis on employee freedom and creativity.

Blockchains: A review and research agenda for international business

A growing number of firms around the world are adopting blockchain technology. However, international business literature has devoted little attention to blockchain despite its potential to transform the field. Our study seeks to provide a thorough understanding of blockchain and the implications of the technology as it represents a new way to produce and maintain trust between organizations. We also provide a comprehensive discussion of the implications of blockchain for international business research. Specifically, we evaluate how blockchain can help firms overcome gaps in trust and increase transparency in supply chains, improve inter-organizational relationships, and reduce the need to internalize activities by lowering transaction costs. We also discuss how blockchains are transforming capital raising activities and accelerating the speed with which firms internationalize. We conclude with research opportunities for international business scholars to pursue to better understand the implications of blockchain technologies.

Collaborative Procurement Practices in Public Organizations: A Review of Forms, Benefits and Challenges

This study reviewed forms, benefits, and challenges of collaborative procurement practice that could be applied in public organizations in developing countries like Tanzania. The study is exploratory and descriptive in nature under which a systematic literature review was conducted to examine the various forms, benefits, and challenges of collaborative procurement. In this approach, information was gathered from the existing body of literature on collaborative procurement and cooperative purchasing practices. Based on the main results, the study ascertained that piggy-backing groups, third-party groups, professional networks, and project groups are the main four forms of collaborative procurement practices that may be applicable in public organizations. Results suggested that organizations that engage in collaborative procurement practices enjoy several benefits, including minimum prices, low transaction costs, high-quality products, reduced workloads, and minimal supply risks. However, demand heterogeneity can complicate the procurement process, and inflexibility and control of collaborative procurement activities are major challenges for implementing collaborative procurement practices. Despite these challenges, the study concluded that collaborative procurement practices can be beneficial in public organizations in developing countries like Tanzania. The study recommends that collaborative members establish clear guidelines and agreements for collaborative procurement practices to ensure successful implementation.

Decomposing the impacts of an agricultural value chain development project by ethnicity and gender in Nepal

This paper estimates the impact of an inclusive agricultural value chain development project on agricultural productivity and decomposes the impact by gender and ethnicity of producers. The intervention sought to alleviate poverty among small-scale producers by increasing agricultural productivity and lowering transaction costs. It also specifically targeted minority and female producers to ensure inclusivity. We use primary survey data from over 2,500 households in rural Nepal. We estimate the impact on agricultural productivity by employing a treatment effect estimator, and decompose it by gender and ethnicity using the Kitagawa-Oaxaca-Blinder (KOB) decomposition method. We find that the project has a positive impact on agricultural productivity, but the impact is higher for non-minority and male-headed households than for minority and female-headed households, respectively. The ethnicity productivity gap is smaller in the treatment group than in comparison group. Even though male-headed households have consistently higher productivity, the gender gap in agricultural productivity is smaller in the treatment group compared to the comparison group. KOB decomposition shows that the ethnicity- and gender- specific differential impacts are mainly driven by differential endowment effects, primarily land and labor endowments. Results suggest that the project reduced the ethnicity- and gender-specific productivity gaps, although it did not eliminate them entirely. These findings highlight the need for targeted support to vulnerable producers including ethnic minority and female producers. Specifically targeted land tenure security programs can ensure that vulnerable producers can harness benefits in a manner which could help narrow productivity differences.

Determinants of farmers’ decision to choice market outlets: Evidence from milk producer farmers in Ada’a Berga District Ethiopia

In Ethiopia, many initiatives have been implemented to empower smallholder dairy farmers to develop viable livelihoods from the sector. The problem with these policies is the inability to reach farmers at large, and dairy farmers in rural areas are always challenged to deliver milk and milk products faster to the final market. The study was aimed at investigating factors that influence market channel choices among dairy producers in Ada’a Berga district Ethiopia. This paper uses data from a survey of 123 dairy producer households in four rural kebeles to analyse the factors that influence the choice of a milk marketing channel. Multivariate probit econometric model results show that income from dairy source, market information and educational level of household affected wholesaler outlet. The choice of consumer outlet is influenced by family size, membership in a dairy cooperative, market information, non-dairy income and income from dairy source. Number of milking cows, membership in a dairy cooperative and non-dairy income determined the choice of dairy cooperative outlet. The choice of district retailer’s market outlet was affected by sex of households, membership in a dairy cooperative and income from dairy sources. Choice of rural collector outlet is negatively influenced by non-dairy income and access to an extension contact. Therefore, policies should be designed that encourage farmers’ cooperatives, contract farming and collective action in order to lower transaction costs, expand market information for dairy producers, expand extension services and expand infrastructures such as road and transportation facilities, which are needed to promote the effective marketing of milk through all outlets.

Defining the Organization of Municipal Solid Waste Management Based on Production Costs

A long-lasting dilemma on the efficient provision of services of general economic interest has become increasingly important in the waste management industry: competition or monopoly in municipal solid waste management. Previous literature has primarily examined the economics of scale and scope to provide an adequate response. Here, we contribute by investigating subadditivity in municipal solid waste management service costs. Subadditivity is a critical concept used to justify imperfect competition, which encourages natural monopolies where one producer will function more effectively than more firms. To test the hypothesis that a subadditivity in costs in waste management exists, we design a simulation based on empirical data for Milan, Italy. We compared the total production cost of the incumbent firm with the alternative hypothesis built by dividing the city into four areas and assigning each area to a different hypothetical firm. The results suggest that the existence of subadditivity results in 6% lower production costs, primarily stemming from business synergies, lower transactional costs, and optimization of productive resources and facilities. The evidence justifies, ceteris paribus, that the provision by a single firm is preferable to multiple firms in the analysis case. Implications for policies are straightforward. The one-fit rule approach fails to set the best condition for policymakers to create a level playing field transparently and efficiently for industry operators to perform efficiently.

Partial intermediary value-chain coordination and its effects on productivity of sweet potato in Tanzania

This study investigates the effect of partial intermediary coordination on Tanzania sweet potato productivity. A cross-sectional research design was used, and a sample of 100 small-scale farmers from Kilosa and Gairo Districts were surveyed using both purposive and simple random sampling techniques. Data analysis tools included the Statistical Package for Social Sciences, Microsoft Excel and Ethnographic Content Analysis. Three key value chain actors primary, secondary, and tertiary were identified by the study, along with their roles and linkages. The majority of farmers identified three main factors that affected crop productivity in the research area: Lack of improved cultivars, restricted access to cash, and small parcels cultivated. Coordination between the horizontal and vertical chain is critical for productivity and efficiency. The study also discovered that weak institutional frameworks exist among key participants in value chain nodes. Farmers and buyers conducted the majority of their business on the spot, and all agreements were unwritten. Meanwhile, only 6% of respondents reported that extension officers had notified them of market price offers and demands from profitable markets. Growers are unable to use innovative production techniques that could lead to economies of scale in shared services and collaborative ventures because of current production practices. It was noticed that rather than raising production, the existing intermediate corporations have contributed to lowering transaction costs. Despite these challenges, there is a lot of potentials for the sweet potato crop to transform rural livelihoods and turn into a valuable commodity. Governance needs to be supported by policies that improve market information flow and necessary infrastructures. While intermediate organizations are essential for improving market connections and lowering transaction costs for dispersed smallholders, it is critical for increasing productivity at the primary production level. Last but not least, the local government should put into effect a strategy designed to promote a climate suitable to the crop. Key words: Partial, Productivity, Coordination, Sweet potatoes, Value-Chain, Smallholders, Actors, Farmers

The impact of active and passive investment on market efficiency: a simulation study

ABSTRACT We create a simulated financial market and examine the effect of different levels of active and passive investment on fundamental market efficiency. In our simulated market, active, passive, and random investors interact with each other through issuing orders. Active and passive investors select their portfolio weights by optimizing Markowitz-based utility functions. We find that higher fractions of active investment within a market lead to an increased fundamental market efficiency. The marginal increase in fundamental market efficiency per additional active investor is lower in markets with higher levels of active investment. Furthermore, we find that a large fraction of passive investors within a market may facilitate technical price bubbles, resulting in market failure. By examining the effect of specific parameters on market outcomes, we find that that lower transaction costs, lower individual forecasting errors of active investors, and less restrictive portfolio constraints tend to increase fundamental market efficiency in the market.

Does Mobile Money Adoption Increase Informal Business Performance in Zambia?

Innovation in digital technology has changed the way firms make business. The objective of this paper is to analyse the effect of mobile money adoption on the performance of informal businesses in Zambia. The data are from the 2019 Zambia Informal Sector Business Survey of the World Bank Group with a sample of 914 firms. An instrumental variable bivariate probit model was used to analyse the data. We find that mobile money use helps significantly improve informal business performance. The finding is robust for different purposes of mobile money use. These results can be attributed to the lower transaction costs and the improved liquidity related to the use of mobile money financial services. An important policy implication is that the use of digital technologies such as mobile money could be a key element for improving informal business performance.

Are common bean traders efficient? An empirical evidence from Malawi

Efficient agricultural markets can be a bedrock for diverse economy-wide benefits ranging from improvements in resource use to price stabilisation. However, as is the case with most developing and agrarian countries, Malawi's agricultural markets are still developing. This is mainly the case in the country's legume markets, especially the bean marketing system. The current study assessed the market efficiency of common bean traders in Malawi using a multiple linear regression model. By focusing on the bean traders in the major markets in Malawi, the study departs from earlier research on bean marketing, which has placed greater emphasis on the farmer. The findings reveal that traders in bean markets mostly use informal sources of market information. Again, transaction costs such as transportation, storage, handling and distance to sources of bean reduce marketing efficiency. The scale of the operation portrayed a positive influence on marketing efficiency. Access to credit significantly increased marketing efficiency for both wholesalers and retailers. In addition, markets that are located in rural areas had a negative effect on marketing efficiency as compared to markets in urban areas, further agreeing with the focus of the National Agriculture Policy (NAP) to introduce structured markets in rural areas. The study recommends adjustments in policies in the NAP that would promote smooth access to reliable market information, especially in rural areas. The upgrading of the rural road system and warehousing facilities should be promoted in order to lower transaction costs. This will enable bean traders to expand their operations on a larger scale while also lowering expenses and increasing profits.

How Catalytic Is Digital Technology in the Nexus between Migrants’ Remittance and Financial Development in Sub-Saharan African Countries?

Given the indisputable roles of remittance and financial development in countries’ economic performance, enhancing the nexus between the two variables has become pertinent. The remittance–financial development literature has surged, with a growing argument that making the relationship work is conditioned on mediating roles of certain economic indicators. Despite the overwhelming evidence of the transformative roles of digital technology, the assessment of its possible mediating role in the remittance–financial development nexus is lacking in the literature. Hence, using pooled data of 35 Sub-Saharan African (SSA) countries sourced from the World Bank’s Development Indicators, this study examined the mediating effect of digital technology in the relationship between remittance inflows and financial development. Using two indicators of ICT—fixed broadband and mobile cellular subscription—the results of the generalized method of moment analysis suggest that digital technology spurs remittance inflows to promote financial development in SSA. The results are consistent for both measures. These findings imply that remittance and digital technology are complementary in promoting financial development in the sub-region. Based on these outcomes, the study therefore advances the enactment of policies aimed at fostering diffusion of digital technology and achieving the sustainable development goal’s recommendation of lower transaction cost of remittances.

Clusters of Agrocredit Suppliers in Tanzania and their Associated Transaction Costs: A Scholarly Personal Narrative

This paper blends the Scholarly Personal Narrative (SPN) with desk reviews of selected literature on the key concepts and their applications in understanding the key features of agrocredit supply in rural areas. The findings of this exploratory study indicate that the informality of agrocredit supply is associated with low transaction cost, low levels of credit and low levels of repayment rates. It is also noted that the formalised and regulated suppliers are more associated with higher levels of transaction cost with relatively higher levels of repayment. Transaction costs related to searching for potential borrowers, negotiation and enforcement are higher for most regulated suppliers because they involve third parties. Where the transaction involves small volumes of agrocredit, the transaction cost increases due to supplier’s compliance to legal formalisation and licensing. In-kind agrocredit supply models are recommended to be the most plausible models for resource poor smallholder farmers due to the fact that in-kind credit is not agile and that it can be used on intended cause. It is also recommended that in order to reduce transaction cost, agrocredit suppliers of in-kind agrocredit should deal with the farmer groups or primary cooperatives which act on behalf of member farmers.

Competition and cooperation in artificial intelligence standard setting: Explaining emergent patterns

AbstractEfforts to set standards for artificial intelligence (AI) reveal striking patterns: technical experts hailing from geopolitical rivals, such as the United States and China, readily collaborate on technical AI standards within transnational standard‐setting organizations, whereas governments are much less willing to collaborate on global ethical AI standards within international organizations. Whether competition or cooperation prevails can be explained by three variables: the actors that make up the membership of the standard‐setting organization, the issues on which the organization's standard‐setting efforts focus, and the “games” actors play when trying to set standards within a particular type of organization. A preliminary empirical analysis provides support for the contention that actors, issues, and games affect the prospects for cooperation on global AI standards. It matters because shared standards are vital for achieving truly global frameworks for the governance of AI. Such global frameworks, in turn, lower transaction costs and the probability that the world will witness the emergence of AI systems that threaten human rights and fundamental freedoms.

Financial literacy, financial development, and leverage of small firms

This study examines the relationship between financial literacy and the leverage of small firms, specifically of the legal forms, sole proprietorships, and partnerships. Using a cross-section of 73,302 firms in 22 countries, we find that the leverage of small firms is negatively associated with financial literacy. Further, we explore the role of financial development, bankruptcy and transaction costs, and information asymmetry, in moderating the relationship. We find that the negative relationship is less pronounced in countries with lower financial development, high bankruptcy and transaction costs, and high information asymmetry environments, respectively. We contribute to the understanding of small firms' leverage and the literature on financial literacy, SMEs, finance, and entrepreneurship. This study offers policy implications for economies that promote SMEs for entrepreneurship training and development.

TRADE OPENESS FUNCTIONING TO PROMOTE ECONOMIC PROSPECTS: AN ANALYSIS OF THE NEW EU MEMBER STATES

Given the developments in economic theory so far, the European Union (EU) accession process is believed to bring significant benefits to newcomers, especially in terms of fostering their economic growth, which is induced by abolishing import tariffs and other trade barriers, intensifying trade flows and ensuring a more efficient usage of resources. Although empirical evidence on these correlations is mixed, many in the new EU member states and in candidate countries hope that EU membership will pave the way towards their economic prosperity, which would ensure a meaningful reduction in the income gap between new and old EU members. Accordingly, trade liberalisation, which implies lower transaction costs, increased specialisation, scale economy, and competitive pressures, has become a priority, especially for the accessing economies which are traditionally less open in comparison to the economies which first joined the EU. This study aims to assess the impact of trade openness, measured through the dynamics of exports and imports, on the economic growth of the last three member countries to join the EU (Romania, Bulgaria and Croatia) by employing panel data for the period before and after their accession (1997-2017). The results of the study confirm the expansion of the sample countries’ trade flows after the accession, as well as a positive correlation between the dynamics of trade flows and gross domestic product (GDP) growth. Still, it can be concluded that the exploitation of the positive effects of trade openness is conditioned by the level of the countries’ pre-accession economic progress and other determining variables.

Analysis of Transaction Costs and Market Participation among Cassava Farmers in Osun State, Nigeria

This study examined the effects of transaction cost variables on market participation among cassava farmers in Osun State, Nigeria. This was with a view to providing insight into how transaction cost factors can be managed to ensure that cassava farmers in Osun State participate more in the market for the purpose of promoting cassava production and hence agricultural growth as well as reducing poverty among the rural community. Access to market information, non-farm work, road condition, credit availability, access to telecommunication facilities, personal transport, farm size, farming experience, price of cassava, market distance, transport cost, dependency ratio, as well as age were used as proxies for transaction costs. The study made use of primary data by administering copies of a well-structured questionnaire to 100 cassava farmers drawn from three local governments in the State. Data obtained were analysed descriptively using frequencies, tables, simple percentages as well as pie and bar charts. Data collected were also analysed by inferential statistical procedure using Logit regression model. Results of the logit regression showed that access to market information and farm size have significant positive effects on cassava farmers’ participation in the market (). Findings also revealed that cost of transportation and dependency ratio have weakly significant negative effects on the probability of cassava farmers participating in the market (). The study concluded that access to market information and farm size play significant positive roles in the participation of cassava farmers in the market. Thus, policies that are aimed at lowering transaction costs through the creation of an enabling environment in which farmers can easily access market information, cultivate more farmlands and incur low cost of transportation are recommended.

Creation, management and devaluation – examining the workings of the seventeenth-century meadow economy in southern Sweden

ABSTRACT Meadow land use has been the object of very limited historical research in Sweden, as most studies have focused on ecological or functional aspects. Research on the economy of meadows is rare. This paper addresses this issue by studying the investment in, and management of, meadows in seventeenth-century Sweden considering landesque capital, a concept referring to long-term investments in land through labour. We also examine the local economic institutions developed to handle this type of capital. By analysing seventeenth-century century court records from the districts of Östra, Redväg and Kind, a more complete picture emerges of the processes and contexts in which meadows were created, managed and devalued / revalued over time. Meadow capital was constantly under threat of degeneration due to biophysical processes, and this paper explores the different strategies used to handle this problem. Outlying meadows were often more flexible in terms of ownership and were often used by others when abandoned, either by agreement or surreptitiously, which frequently led to future ownership conflicts. The comparatively limited number of cases relating to meadows nonetheless emphasises the fairly low transaction costs incurred by institutions related to meadow land use at this time. It was often the outlying meadows that appeared in court proceedings, most likely related to these meadows not being contiguous to the rest of the land of the person using them as well as these meadows having a more dynamic owner/usership history compared to infield meadows.

Adoption of electronic banking

This study aims to investigate the factors influencing behavioral intention to use e-banking services as well as the impact of awareness as an external variable on the technology acceptance model (TAM). The study is based on original information gathered from 206 respondents who live throughout Kosovo. Confirmatory Factor Analysis and Structural Equation Model were employed in the analysis, which was conducted using AMOS statistical software. As a result, it was found that customers of banking institutions are not sufficiently aware of the usefulness of e-banking services and the opportunities offered. Perceived ease of use, perceived usefulness, and attitude seem to influence the intention to use e-banking. Attitude was found as a major predictor of the intention to use. Various marketing campaigns from financial institutions should focus on educating people about the advantages of using e-banking, such as time savings, lower transaction costs, up-to-date customers, and other information. Likewise, to create other benefits for e-banking services, only then will consumers have positive attitudes and intentions to use these services.