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When is capital enough to get female microenterprises growing? Evidence from a randomized experiment in Ghana

  • Marcel Fafchamps
  • David McKenzie
  • Simon Quinn
  • Christopher Woodruff

Standard models of investment predict that credit-constrained firmd should grow rapidly when given additional capital, and that how this capital is provided should not affect decisions to invest in the business or consume the capital. We randomly gave cash and in-kind grants to male- and female- owned microenterprises in urban Ghana. Our findings cast doubt on the ability of caoital alone to stimulate the growth of female microenterprises. First, while the average treatment effects of the in-kind grants are large and positive for both males and females, the gain in profits is almost zerp fpr women with itital profits below the median, suggesting that capital alone is not enough to grow subsistence enterprises owned by women. Second, for women we strongly reject equality of the case and in-kind grants; only in-kind grants lead to growth in business profits. The results for men also suggest a lower impact of cash, but differences between cash and in-kind grants is assoicated more with a lack of self-control than with external pressure. As a result, the manner in which funding is provided affects microenterprise growth.

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Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 2011-11.

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Date of creation: 2011
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Handle: RePEc:csa:wpaper:2011-11
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