Complementing Business Training with Access to Finance: Evidence from Smes in Kenya
40 Pages Posted: 12 Apr 2024
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Complementing Business Training with Access to Finance: Evidence from Smes in Kenya
Abstract
This paper investigates the complementarity between business training and timely access to financial capital for small and medium enterprises (SMEs) in Kenya. All participants in a business support program are offered training. One-third of participants are offered loans immediately after training (Concurrent Loan), one-third are offered loans six weeks after training (Delayed Loan), and the remaining third are offered loans after another four weeks (Control). While a long time lag may reduce knowledge retention and application by SMEs, concurrent access to loans and associated business spending may crowd out the entrepreneurs' attention from improving business practices. We find evidence for the latter. While SMEs in both Control and Delayed Loan groups improve their business practices, SMEs in the Concurrent Loan group who take loans do not improve their practices at all. Moreover, entrepreneurs who take loans spend less time on their businesses and experience declines in business revenue.
Keywords: Business Training, access to finance
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