Walk into the crowded Kariakoo market in Dar es Salaam, Tanzania, and you’re likely to see 25 traders in a row selling similar goods. If you’re a banker with money to loan to a small business, you naturally want to pick the one most likely to make repayments. But without formal credit histories to compare, says Dennis “DJ” DiDonna, chief operating officer of Entrepreneurial Finance Lab (EFL), “how can you tell which one has the grassroots skills to be successful?”

This mystery has...

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