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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:The Enforcement of Commercial Contracts in Ghana
Author:Fafchamps, MarcelISNI
Periodical:World Development
Geographic term:Ghana
Subjects:law of contract
Development and Technology
Economics and Trade
Law, Human Rights and Violence
External link:https://doi.org/10.1016/0305-750X(95)00143-Z
Abstract:Sub-Saharan Africa is often perceived as a part of the world where business is hindered by the lack of contract discipline. Because of Africans' laid-back culture, the argument goes, supplies are delayed, quality is unreliable, and payments come late. Using data from Ghana, this paper deals with the following questions: Is this lack of discipline real or supposed? If real, is it due to a cultural failure to recognize the need for business predictability, or is it a corollary of the prevailing economic environment? Fifty-eight Ghanaian manufacturing and trading firms of all sizes were interviewed in January 1993 by a team of Ghanaian and World Bank researchers. The paper first brings together various enforcement concepts suggested in the literature and ties them in with contractual information and incentive issues as they have appeared in the economic literature on contracts. Then it discusses the survey results, which show that the enforcement of commercial contracts in Ghana is problematic for essentially two reasons. First, there is no mechanism by which information about bad payers is widely shared among firms. Second, many firms occasionally find it impossible to honour a contract. The root cause lies not in misconceptions about the needs of business or in an inability to discipline oneself, but rather in the low level of economic development and the magnitude of shocks to which manufacturing firms are subjected. Bibliogr., notes, ref., sum.