Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions
AbstractCan one teach basic entrepreneurship skills, or are they fixed personal characteristics? Most academic and development policy discussions about microentrepreneurs focus on their access to credit, and assume their human capital to be fixed. The self-employed poor rarely have any formal training in business skills. 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 group lending 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 program also improved repayment and client retention rates for the microfinance institution. Larger effects found for those that expressed less interest in training in a baseline survey. This has important implications for implementing similar market-based interventions with a goal of recovering costs.
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Bibliographic InfoPaper provided by Center for Global Development in its series Working Papers with number 107.
Length: 48 pages
Date of creation: Jan 2007
Date of revision:
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Web page: http://www.cgdev.org
entrepreneurship; microentrepreneur; business skills; business training; credit;
Other versions of this item:
- Dean Karlan & Martin Valdivia, 2011. "Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 510-527, May.
- Martin Valdivia & Dean Karlan, 2006. "Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions," Working Papers 941, Economic Growth Center, Yale University.
- Dean Karlan & Martin Valdivia, 2006. "Teaching entrepreneurship: Impact of business training on microfinance clients and institutions," Natural Field Experiments 00282, The Field Experiments Website.
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
- M0 - Business Administration and Business Economics; Marketing; Accounting - - General
- M40 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - General
This paper has been announced in the following NEP Reports:
- NEP-ACC-2007-04-21 (Accounting & Auditing)
- NEP-ALL-2007-04-21 (All new papers)
- NEP-DEV-2007-04-21 (Development)
- NEP-ENT-2007-04-21 (Entrepreneurship)
- NEP-HRM-2007-04-21 (Human Capital & Human Resource Management)
- NEP-KNM-2007-04-21 (Knowledge Management & Knowledge Economy)
- NEP-MFD-2007-04-21 (Microfinance)
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