Relationships and traders in Madagascar

TLDR

Family plays little role in business beyond assistance at start‑up. This article documents the role that personal relationships play in economic exchange. Relationships are employed to circulate price and market information, provide trade credit, manage contractual issues, ensure regular trade flows, and mitigate risk. Survey data reveal that Malagasy agricultural traders view personal relationships as the key driver of business success, with regular supply‑demand coordination and risk sharing being especially critical, and that traders with stronger, higher‑quality relationships tend to be larger and more prosperous.

Abstract

This article documents the role that personal relationships play in economic exchange. Original survey data show that agricultural traders in Madagascar perceive relationships as the most important factor for success in their business. Evidence details the extent to which relationships are used to serve a variety of purposes such as: the circulation of information about prices and market conditions; the provision of trade credit; the prevention and handling of contractual difficulties; the regularity of trade flows; and the mitigation of risk. Of these, the regularity of supply and demand and the sharing of risk appear particularly important. Larger and more prosperous traders are those with quantitatively and qualitatively better relationships. Family plays little role in business beyond assistance at start‐up.