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Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions

46 Pages Posted: 25 Jul 2006  

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)

Martin Valdivia

Grupo de Analisis para el Desarrollo (GRADE)

Date Written: July 2006

Abstract

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.

Keywords: entrepreneurship, microfinance, business training, business skills, adult education

JEL Classification: C93, D12, D13, D21, I21, J24, O12

Suggested Citation

Karlan, Dean S. and Valdivia, Martin, Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions (July 2006). Yale University Economic Growth Center Discussion Paper No. 941; Center for Global Development Working Paper No. 108. Available at SSRN: https://ssrn.com/abstract=920487

Dean Karlan (Contact Author)

Yale University ( email )

Box 208269
New Haven, CT 06520-8269
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 ( 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 )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Martin Valdivia

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

Av, Gra├║ 915
Barranco, Lima
Peru

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