Business Training for Microfinance Clients: How It Matters and for Whom?

PEP Working Paper Series 2008-11

36 Pages Posted: 14 May 2018 Last revised: 12 Jul 2018

See all articles by Verónica Frisancho

Verónica Frisancho

Inter-American Development Bank (IDB)

Dean S. Karlan

Yale University; Northwestern University - Kellogg School of Management; Innovations for Poverty Action; Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab (J-PAL); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Martin Valdivia

Grupo de Analisis para el Desarrollo (GRADE)

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2008

Abstract

We measure the impact of a business training program for female microentrepreneur clients of a group banking program in Peru. Using the credit with education model, we assigned clients randomly to either treatment or control groups. Treatment groups received thirty to sixty minute entrepreneurship training sessions during their normal weekly group banking meeting. These lasted between one to two years. Control groups remained as they were before, meeting weekly with the group banking program solely for making loan and savings payments. We find that intention to treat (ITT) led to higher repayment and client retention rates for the microfinance institution, improved business knowledge, and practices. More importantly, average business sales revenues also increase while revenues fluctuations were reduced. In addition, we find significant heterogeneity in the exposure of clients within the treatment group. Treatment on the treated (TOT) estimates, obtained using ITT as instrumental variable, show substantially larger effects.

Keywords: microfinance, business training, adult education

Suggested Citation

Frisancho, Veronica and Karlan, Dean S. and Karlan, Dean S. and Valdivia, Martin, Business Training for Microfinance Clients: How It Matters and for Whom? (May 1, 2008). PEP Working Paper Series 2008-11, Available at SSRN: https://ssrn.com/abstract=3171529 or http://dx.doi.org/10.2139/ssrn.3171529

Veronica Frisancho

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Dean S. Karlan

Yale University ( email )

Box 208269
New Haven, CT 06520-8269
United States

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Innovations for Poverty Action ( email )

1731 Connecticut Ave, 4th floor
New Haven, CT 20009
United States

Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab (J-PAL) ( email )

E60-246
77 Massachusetts Avenue
Cambridge, MA 02139
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Martin Valdivia (Contact Author)

Grupo de Analisis para el Desarrollo (GRADE) ( email )

Av, Graú 915
Barranco, Lima
Peru

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