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BUSINESS TRAINING OR TECHNICAL ASSISTANCE FOR FEMALE MICROENTREPRENEURS: LESSONS FROM TWO EXPERIMENTAL EVALUATIONS. Martin Valdivia Conference "Women's Entrepreneurship: What do we know? What is next?” Washington D.C., April 6th, 2011. Structure of the presentation.

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Martin Valdivia

Conference "Women's Entrepreneurship: What do we know? What is next?”

Washington D.C., April 6th, 2011

structure of the presentation
Structure of the presentation
  • Motivation: Teaching entrepreneurship to female microentrepeneurs
  • This presentation: Analysis of two experimental interventions for improving management capital for female microentrepreneurs
  • Research questions
  • Results and discussion
  • Remaining questions
motivation i
Motivation I
  • Is it possible to transform a small trader/producer into a successful businesswoman?
    • In the developing world, millions of people work in their own familiar microbusinesses (GEM, 2007)
    • Many of those families are still poor
      • Exclusion or use of opportunities? (Perry, et. al., 2007)
  • Entrepreneurship in Latin America reproduces gender inequities (GTZ-BM-BID, 2010)
    • Female participation in labor force has increased a lot in the last decades, but mainly in the informal sector
    • Female-run businesses tend to be smaller, less profitable and less productive
motivation ii
Motivation II
  • Majority of microbusinesses have low returns to capital, especially those female-run (de Mel, McKenzie y Woodruff, 2008)
    • Possibilities of business growth and sustainability are ambiguous
    • Contribution of this sector to poverty reduction and economic growth is uncertain
  • Pro-microentrepreneurship interventions have been tried (microfinance, titling), but recent evidence showed they have not been enough
    • Microfinance (Banerjee et. al., 2009; Karlan & Zinman, 2010)
    • Titling (Field & Torero, 2005; Galiani & Schargrodsky, 2010)
motivation iii
Motivation III
  • So, what else could be done to strengthen entrepreneurial efforts by females?
    • If the problem is exclusion, firms may be inefficient
    • need to improve management capital available to these businesses (Bruhn, Karlan & Schoar, 2010)
      • business training
      • Technical assistance
      • Or both?
    • In the case of women, need to include a gender approach to empower the role of women within the household and in the community
what do we present here
What do we present here?
  • Lessons from two experimental evaluations:
    • Teaching entrepreneurship: Impact of business training on microfinance clients and institutions, with Dean Karlan (forthcoming, REStat 2011)
    • Training or Technical assistance for female microentrepreneurs?: an experimental evaluation (first results, study in progress)
  • Driving research questions
    • Can entrepreneurship be taught, making a businesswoman succeed?
      • Is it intuition, determination?
      • Adoption of good business practices?
    • Need some concrete advice (technical assistance) to improve business outcomes and consolidate new knowledge?
characteristics of study 1 finca
Characteristics of Study 1(FINCA)
  • A business training module was added to the financial services of a MFI
    • We worked with FINCA-Perú, small but financially sustainable MFI (village banking)
    • Serving microentrepreneur women in Lima and Ayacucho
    • Two modules (22 sessions, with Atinchik, FFH):
      • Module 1: what is a business, how does the market work, commercial strategies
      • Module 2: separate account management (home-business), productions costs calculation, prices
    • Half-hour sessions in the dates of their regular payment meetings, run by previously trained FINCA promoters
    • Random assignment of banks to treatment and control groups to identify effects
      • Control group: business as usual for FINCA village banks
      • Marginal contribution of training on clients and MFIs
characteristics of study 2 consortium
Characteristics of Study 2 (Consortium)
  • Study associated to the RBI project by WB-UNIFEM
    • Eligible female microentrepreneurs were called in the north and south cone of Lima
    • Design and execution of training in charge of the consortium CEDLAS-CAPLAB-INPET
    • Three modules: personal development, business management, productive development
  • Random selection of beneficiaries and control group from the eligible interested population
    • T1 3-month regular training, 3 classroom group sessions of 3 hours each week
    • T2 regular training plus technical assistance (AT)
    • C  nothing
research questions
Research questions
  • Key general questions
    • Can good business practices be taught to adult women with low formal education level and, in some cases, low self-esteem?
    • Can the training contribute to the growth of the women´s business?
  • FINCA study
    • Can training help improve the outcomes of the MFI? (client retention, repayment rate, loan size, etc.)
    • Should the MFIs provide business management training?
  • Consortium Study (how to provide training?)
    • Is there any difference when the training is provided by specialists?
    • Can traditional training be enough (transmission of good business practices), or is a component of technical assistance required (more specific advice to the businesses of these women)?
results do microentrepreneurs practices change improve
Results: do microentrepreneurs’ practices change/ improve?
  • Yes, definitely
    • FINCA study: improved record keeping of inputs/outputs, separate household and business accounts, reinvest more, think proactively about business innovations and implement them
    • Consortium study: separate household and business accounts, close non-profitable businesses/ open new businesses, participate more in producers/ traders associations, seek more credits (specially from informal sources)
  • According to the emphasis of each training
    • But not all recommended practices were adopted
results does it contribute to businesses growth
Results: does it contribute to businesses growth?
  • It seems general training is not enough, TA is needed
    • FINCA study: sales of the treated increased 15% more than those of the control group, especially in “low” periods
      • Nevertheless, we cannot reject that this effect might be explained by some structural differences
    • Consortium study: sales increased between 17%-20%, but only for women who received full treatment (general training plus technical assistance)
  • Could it be the effect of working with specialists in the provision of training (Consortium)?
    • No, as women with just regular training in Consortium study do not present any effects either
    • Instead, the effect is only significant when combining general training with technical assistance
discussion of key results
Discussion of key results
  • Policy implication:
    • Teaching general good business practices (GT) is cheaper and more scalable, but TA is needed to help microentrepreneurs grow
    • Both effects are stronger in relatively larger businesses
      • Existence of a threshold from which this kind of intervention can help
  • But, can we really say that the full intervention (GT+TA) has transformed beneficiaries in better businesswomen?
    • Not necessarily. Positive effects do imply there were inefficiencies (room to improve) and specific advice was sound
    • Do not know whether the diagnosis and innovation process could be replicated further without a third party’s help (subsidized or not)
      • If not, these microentrepreneurs would still be vulnerable to changes in the economic context,
      • and their businesses’ growth and sustainability would still be uncertain
    • We can learn a lot from a second follow up.
other key results
Other key results:
  • Should a MFI provide business training? It is beneficial for the MFI
    • Improves client retention
    • Reduces loan repayment problems of the members
      • Important: with joint liability, there are repayment problems that do not affect directly the MFI accounts
      • But with joint liability, payment problems destabilize village banks, so improvements in this indicator are good for the MFI
    • But things may still get complicated if TA is added
  • FINCA study provided training in a mandatory scheme
    • Who benefits the most?
    • Results in business practices and institutional outcomes are stronger in those initially less interested in the training
    • Policy implication: demand-driven selection of beneficiaries would not be the most appropriate choice
      • Free-trial periods and tied-sales would be more advisable
remaining questions i randomization and effective treatment
Remaining questions I: randomization and effective treatment
  • Consortium study: only 50% of the selected beneficiaries accepted to start the training program, and only 305 reached 75% of it.
    • In the FINCA study that selectivity was also true, because of clients dropping out of village banks
    • In any case, ITT estimator is relevant if programs work this way
    • A cost-benefit analysis that assumes perfect compliance is not useful
  • Nevertheless, it is crucial to try to see how to maximize effective treatment
    • Connection between early childbearing/distance to training center suggest time constraint is a key issue (childcare services, shorter/less frequent sessions)
    • Other related adjustments: group invitations, use of ICTs may help catch up after unavoidable absences
remaining questions ii external validity
Remaining questions II: external validity
  • Businesses in both studies are very small
    • FINCA study: average monthly sales of 800 soles
    • Consortium study: average weekly sales of 500 soles
  • This group is very important because it includes very poor people
  • Nevertheless, it is valid to think that results could be different for small and medium businesses
    • Pilot strategies like these should be implemented
    • It is likely that other restrictions may come as relevant
      • Formality costs, technological level