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

Author

Listed:
  • Martin Valdivia

    () (Grupo de Analisis para el Dessarrollo)

  • Dean Karlan

    () (Economic Growth Center, Yale University)

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.

Suggested Citation

  • Martin Valdivia & Dean Karlan, 2006. "Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions," Working Papers 941, Economic Growth Center, Yale University.
  • Handle: RePEc:egc:wpaper:941
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    File URL: http://www.econ.yale.edu/growth_pdf/cdp941.pdf
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    References listed on IDEAS

    as
    1. Eric V. Edmonds, 2005. "Does Child Labor Decline with Improving Economic Status?," Journal of Human Resources, University of Wisconsin Press, vol. 40(1).
    2. Basu, Kaushik & Van, Pham Hoang, 1998. "The Economics of Child Labor," American Economic Review, American Economic Association, vol. 88(3), pages 412-427, June.
    3. 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 274-298, April.
    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.
    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.
    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.
    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.
    8. 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.
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    More about this item

    Keywords

    entrepreneurship; microfinance; business training; business skills; adult education;

    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: Theory
    • 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, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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