Changing Business Practices of Micro and Small Enterprises: Evidence from an RCT with 12 Financial Service Providers

Abstract

Even with access to finance, few micro and small entrepreneurs grow their businesses pro- fessionally, possibly due to inefficient management. Using a randomized control trial, we measure the impact of a business training program frequently implemented worldwide. In Indonesia, the program worked with twelve large financial service providers who provided group training and/ or individual counseling to their clients. In line with the existing literature, we find no evidence of changes in business-related outcomes such as profits or sales. While most studies rely on evidence from few hundred entrepreneurs and hence may suffer from lack of precision, a large sample size from a panel of 3,975 entrepreneurs provides us with more confidence in our zero findings. However, we also find that effects vary across partner institutions with one bank achieving significant behavioural changes associated with greater marketing knowledge. Being able to compare the results across a dozen banks and cooperatives, our evaluation provides a new argument in the ongoing "training doesn't work" debate highlighting the role of partner selection in this and similar interventions.

JEL Classification: D22, L26, O12, O17