Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions
Dean S. Karlan
Yale University; Innovations for Poverty Action; Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)
Grupo de Analisis para el Desarrollo (GRADE)
Yale University Economic Growth Center Discussion Paper No. 941
Center for Global Development Working Paper No. 108
Can one teach entrepreneurship, or is it a fixed personal characteristic? Most academic and policy discussion on microentrepreneurs in developing countries focuses on their access to credit, and assumes their human capital to be fixed. However, a growing number of microfinance organizations are attempting to build the human capital of micro-entrepreneurs in order to improve the livelihood of their clients and help further their mission of poverty alleviation. Using a randomized control trial, we measure the marginal impact of adding business training to a Peruvian village banking program for female microentrepreneurs. Treatment groups received thirty to sixty minute entrepreneurship training sessions during their normal weekly or monthly banking meeting over a period of one to two years. Control groups remained as they were before, meeting at the same frequency but solely for making loan and savings payments. We find that the treatment led to improved business knowledge, practices and revenues. The microfinance institution also had direct benefits through higher repayment and client retention rates. Larger effects found for those that expressed less interest in training in a baseline survey have important implications for implementing similar market-based interventions with a goal of recovering costs.
Number of Pages in PDF File: 46
Keywords: entrepreneurship, microfinance, business training, business skills, adult education
JEL Classification: C93, D12, D13, D21, I21, J24, O12
Date posted: July 25, 2006
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