Household Financing of Informal Transfers in Rwanda: The Role of Smallholder commercialisation

This paper examines the relationship between agricultural market participation and informal transfers in Rwanda, using maize commercialization as a proxy for market engagement. Drawing on nationally representative household survey data and employing a range of econometric approaches—including ordinary least squares (OLS), fixed effects, instrumental variables (IV), and semi-parametric matching techniques (Entropy Balancing, Augmented Inverse Propensity Weighting, and IPWRA)—we provide robust evidence that maize commercialization significantly enhances household involvement in informal redistribution networks. Baseline estimates indicate that participation in maize markets is associated with a 49–56% increase in informal transfers. When potential endogeneity is addressed using an IV strategy, the estimated effect rises substantially to 142%, indicating a strong causal relationship. Mechanism analysis suggests that this effect is partly mediated through household consumption: commercialization is positively associated with both total and food consumption expenditures, which likely increase a household’s economic capacity and social obligations within informal risk-sharing systems. We further explore the role of household characteristics in shaping informal redistribution. Variables such as cash transfer receipts, marital status, literacy, non-farm business activity, and frequency of market access are positively associated with informal transfers, while female-headed households, disability status, and reliance on wage labor are negatively associated. Overall, our findings highlight the dual function of agricultural commercialization in improving household welfare and reinforcing informal safety nets. These results underscore the importance of inclusive rural development strategies that promote market access and strengthen the resilience of informal redistribution systems, particularly in contexts where formal social protection remains limited.