Overview of Piles of cash and a town of solutions in Kenya, Nigeria (Summer School)
This Planet Money Summer School episode compares two African economic innovations that influenced global thinking: Nigeria’s U-Win program, which tested whether giving small businesses large cash grants could spur growth and jobs, and Kenya’s Busia research hub, where randomized controlled trials helped transform development economics. Together, the stories show how capital access, human capital, and good evidence can shape policy—and why institutions matter for turning ideas into lasting economic growth.
Nigeria: U-Win and the “piles of cash” approach to small business growth
The problem
- Nigeria had a huge youth unemployment challenge and many tiny, informal businesses that struggled to grow.
- A common obstacle was startup capital: businesses like Lariat Alhassan’s paint company needed an office, staff, and equipment, but banks were unlikely to lend to a one-person operation with little formal financial history.
- This is part of the broader African “missing middle” problem:
- lots of very small firms
- lots of large companies
- too few growing mid-sized businesses
The idea
- Then-finance minister Ngozi Okonjo-Iweala helped launch U-Win (“Youth Enterprise with Innovation in Nigeria”).
- The program invited people to submit business plans and competed applicants for large, no-strings-attached cash grants.
- To address corruption concerns, the process used:
- outside judges
- anonymous applications
- a structured review process
- David McKenzie of the World Bank suggested an important twist: after filtering out obvious weak plans, select many winners randomly, making the program easier to evaluate.
What happened
- Thousands applied; Lariat Alhassan advanced through the competition and won 10 million naira (about $65,000).
- She used the money to:
- hire workers and sales staff
- improve marketing
- rent a proper showroom
- The results were striking:
- about 1,200 winners
- roughly 7,000 jobs created
- total program cost around $60 million
- about $8,500 per job created
Why it mattered
- Economists were surprised that entrepreneurs used the money effectively even when selections were partly random.
- The program suggested that direct cash injections can unlock growth when businesses are constrained mainly by lack of capital.
- The model was later copied in Kenya and Senegal.
- Okonjo-Iweala later became Director-General of the WTO.
Kenya: Busia and the rise of randomized controlled trials in economics
Why Busia became famous
- Busia, a town on the Kenya-Uganda border, became an epicenter of development economics research.
- Local researcher Carol Nikesa first encountered economists through a survey asking about goats, bicycles, TVs, and household wealth.
- Those odd questions were part of a broader effort to measure conditions and compare communities.
The textbook study
- Economist Michael Kremer helped design a large study in which schools were randomly assigned to receive textbooks at different times.
- This was one of the early major uses of a randomized controlled trial (RCT) in economics.
- The result was surprising:
- no average improvement in test scores
- but significant gains for students who were already high performers
The policy lesson
- The study suggested that textbooks alone were not enough to lift most students.
- It helped shift attention toward remedial education and other interventions for struggling learners.
- Later Busia-based studies also found major benefits from:
- deworming treatments for schoolchildren
- HIV-risk education programs for girls
- These findings helped reshape global development policy.
Busia as a research ecosystem
- Over time, Busia became a place where researchers, local staff, and communities worked together on experiments.
- Carol Nikesa eventually founded her own research organization there, helping make Busia a hub for RCT-based development research.
- Michael Kremer, along with Abhijit Banerjee and Esther Duflo, later won the Nobel Prize in Economics for using randomized trials to help fight global poverty.
Bigger economic lessons from both stories
1. Capital matters—but access matters more
- Small firms often fail not because the idea is bad, but because they cannot get the money to grow.
- Direct grants can work where credit markets do not.
2. Evidence can overturn assumptions
- The textbook case showed that a seemingly obvious intervention may have limited effect overall.
- Good data helps policymakers focus on what actually works.
3. Institutions are the foundation
- Banks need reliable records, contracts, property rights, and legal systems to lend confidently.
- Without those institutions, even promising businesses can remain stuck.
4. Human capital drives long-term growth
- Education and health are the “capital” embedded in people.
- Better health and schooling can raise productivity and incomes over time.
5. Entrepreneurship is widespread
- The episode emphasizes that in places like Kenya and Nigeria, entrepreneurship is not rare—it is everywhere.
- The challenge is creating systems that let that energy scale into durable businesses and jobs.
Key terms from the episode
Randomized controlled trial (RCT)
A research method in which people or schools are randomly split into a treatment group and a control group to measure the effect of an intervention cleanly.
Human capital
The skills, education, and health that people carry with them and use to produce economic value.
Positive externality
A benefit from an investment that spills over to other people—for example, one person’s education making others more productive too.
Missing middle
A business structure where an economy has many tiny firms and many large firms, but too few medium-sized companies.
Notable takeaways
- Nigeria’s U-Win showed that giving small businesses large cash grants can create real jobs and growth.
- Busia, Kenya helped pioneer economics experiments that changed global development policy.
- The episode’s core message: smart policy needs both ambition and evidence.