The CGIAR Systemwide Program on Collective Action and Property Rights (CAPRi) is an initiative of the 15 centers of the Consultative Group on International Agricultural Research (CGIAR). The initiative promotes comparative research on the role of property rights and collective action institutions in shaping the efficiency, sustainability, and equity of natural resource systems. CAPRi’s Secretariat is hosted within the Environment and Production Technology Division (EPDT) of the International Food Policy Research Institute (IFPRI). CAPRi Working Papers contain preliminary material and research results. They are circulated prior to a full peer review to stimulate discussion and critical comment. It is expected that most working papers will eventually be published in some other form and that their content may also be revised

Now that China and India have found ways of growing out of poverty, attention has again turned to Africa. The purpose of this report is to ask which engines of growth can be activated in sub-Saharan Africa today. After two decades of stagnation in the continent, discouragement is taking hold. The focus of policy has shifted further and further away from growth-oriented interventions towards welfare assistance. Yet, in the long-run, a growth strategy is the most costeffective way of dealing with poverty. This is true for two fundamental reasons: first, growth lifts many of the poor out of poverty; second, it generates the government revenues necessary for anti-poverty measures. A donor strategy that focuses exclusively on short-term poverty alleviation is a dead end, condemned to last indefinitely. Rapid growth, when it happens, is disruptive. Measures are needed to protect vulnerable groups against disruption. In a growing economy, educating the poor is a good way of helping them partake to increased aggregate prosperity. In a stagnating economy, the net effect on poverty reduction is less clear. The rapid increase in education which occurred in sub-Saharan Africa from 1960 to 1990 was not sufficient to generate growth.

A large literature describes how local risk sharing networks can help individuals smooth consumption in the face of idiosyncratic economic shocks. However, when an entire community faces a large covariate shock, and when the transaction costs of transfers are high, these risk sharing networks are likely to be less effective. In this paper, we document how a new technology – mobile phones – reduces transaction costs and enables Rwandans to share risk quickly over long distances. We examine a comprehensive database of person-to-person transfers of mobile airtime and find that individuals send this rudimentary form of “mobile money ” to friends and family affected by natural disasters. Using the Lake Kivu earthquake of 2008 to identify the effect of a large covariate shock on interpersonal transfers, we estimate that a current-day earthquake would result in the transfer of between $22,000 and $30,000 to individuals living near the epicenter. We further show that the pattern of transfers is most consistent with a model of reciprocal risk sharing, where transfers are determined by past reciprocity and geographical proximity, rather than one of pure charity or altruism, in which transfers would be expected to be increasing in the wealth of the sender and decreasing in the wealth of the recipient. JEL Classification: O16, O17, O33