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

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Author Info
Martin Valdivia () (Grupo de Analisis para el Dessarrollo)
Dean Karlan () (Economic Growth Center, Yale University)

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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.

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Publisher Info
Paper provided by Economic Growth Center, Yale University in its series Working Papers with number 941.

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Length: 44 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:egc:wpaper:941

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Related research
Keywords: entrepreneurship; microfinance; business training; business skills; adult education;

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Find related papers by JEL classification:
C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Eric V. Edmonds, 2003. "Does Child Labor Decline with Improving Economic Status?," NBER Working Papers 10134, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Basu, Kaushik & Van, Pham Hoang, 1998. "The Economics of Child Labor," American Economic Review, American Economic Association, vol. 88(3), pages 412-27, June.
  3. Copestake, James, 2002. "Unfinished Business: The Need for More Effective Microfinance Exit Monitoring," Working Papers 23752, University of Sussex, Imp-Act: Improving the Impact of Microfinance on Poverty: Action Research Program. [Downloadable!]
  4. Paulson, Anna L. & Townsend, Robert, 2004. "Entrepreneurship and financial constraints in Thailand," Journal of Corporate Finance, Elsevier, vol. 10(2), pages 229-262, March. [Downloadable!] (restricted)
  5. Edmonds, Eric V., 2006. "Child labor and schooling responses to anticipated income in South Africa," Journal of Development Economics, Elsevier, vol. 81(2), pages 386-414, December. [Downloadable!] (restricted)
  6. Jean-Marie Baland & James A. Robinson, 2000. "Is Child Labor Inefficient?," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 663-679, August. [Downloadable!] (restricted)
  7. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April. [Downloadable!] (restricted)
    Other versions:
  8. Eric V. Edmonds, 2005. "Does Child Labor Decline with Improving Economic Status?," Journal of Human Resources, University of Wisconsin Press, vol. 40(1). [Downloadable!] (restricted)
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Cited by:
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  1. Oosterbeek, Hessel & van Praag, Mirjam & IJsselstein, Auke, 2008. "The Impact of Entrepreneurship Education on Entrepreneurship Competencies and Intentions: An Evaluation of the Junior Achievement Student Mini-Company Program," IZA Discussion Papers 3641, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Drugov, Mikhail & Macchiavello, Rocco, 2008. "Learning and Microlending," CEPR Discussion Papers 7011, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Hessel Oosterbeek & Mirjam C. van Praag & Auke IJsselstein, 2008. "The Impact of Entrepreneurship Education on Entrepreneurship Competencies and Intentions," Tinbergen Institute Discussion Papers 08-038/3, Tinbergen Institute. [Downloadable!]
  4. Núria Rodríguez-Planas, 2007. "What Works Best For Getting the Unemployed Back to Work: Employment Services or Small-Business Assistance Programs? Evidence from Romania," UFAE and IAE Working Papers 712.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
    Other versions:
  5. Kaivan Munshi, 2007. "From Farming to International Business: The Social Auspices of Entrepreneurship in a Growing Economy," NBER Working Papers 13065, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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