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

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  • Dean Karlan

    (Yale University, Innovations for Poverty Action, and Jameel Poverty Action Lab)

  • Martin Valdivia

    (Grupo de Anáálisis para el Desarrollo)

Abstract

Most academic and development policy discussions about microentrepreneurs focus on credit constraints and assume that subject to those constraints, the entrepreneurs manage their business optimally. Yet the self-employed poor rarely have any formal training in business skills. A growing number of microfinance organizations are attempting to build the human capital of microentrepreneurs 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 little or no evidence of changes in key outcomes such as business revenue, profits, or employment. We nevertheless observed business knowledge improvements and increased client retention rates for the microfinance institution. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • 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.
  • Handle: RePEc:tpr:restat:v:93:y:2011:i:2:p:510-527
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    References listed on IDEAS

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    1. Eric V. Edmonds, 2005. "Does Child Labor Decline with Improving Economic Status?," Journal of Human Resources, University of Wisconsin Press, vol. 40(1).
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    7. Signe-Mary McKernan, 2002. "The Impact Of Microcredit Programs On Self-Employment Profits: Do Noncredit Program Aspects Matter?," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 93-115, February.
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    More about this item

    JEL classification:

    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • M0 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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