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Business Training for Microfinance Clients: How it Matters and for Whom?

Author

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  • Veronica Frisancho
  • Dean Karlan
  • Martin Valdivia

Abstract

We measure the impact of a business training program for female microentrepreneur clients of a group banking program in Peru. Using the credit with education model, we assigned clients randomly to either treatment or control groups. Treatment groups received thirty to sixty minute entrepreneurship training sessions during their normal weekly group banking meeting. These lasted between one to two years. Control groups remained as they were before, meeting weekly with the group banking program solely for making loan and savings payments. We find that intention to treat (ITT) led to higher repayment and client retention rates for the microfinance institution, improved business knowledge, and practices. More importantly, average business sales revenues also increase while revenues fluctuations were reduced. In addition, we find significant heterogeneity in the exposure of clients within the treatment group. Treatment on the treated (TOT) estimates, obtained using ITT as instrumental variable, show substantially larger effects.

Suggested Citation

  • Veronica Frisancho & Dean Karlan & Martin Valdivia, 2008. "Business Training for Microfinance Clients: How it Matters and for Whom?," Working Papers PMMA 2008-11, PEP-PMMA.
    • Handle: RePEc:lvl:pmmacr:2008-11
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    File URL: https://portal.pep-net.org/documents/download/id/12030
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    References listed on IDEAS

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    1. Duflo, Esther & Glennerster, Rachel & Kremer, Michael, 2008. "Using Randomization in Development Economics Research: A Toolkit," Handbook of Development Economics, in: T. Paul Schultz & John A. Strauss (ed.), Handbook of Development Economics, edition 1, volume 4, chapter 61, pages 3895-3962, Elsevier.
    2. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-475, March.
    3. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
    4. 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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    Cited by:

    1. Xu, Lisa & Zia, Bilal, 2012. "Financial literacy around the world : an overview of the evidence with practical suggestions for the way forward," Policy Research Working Paper Series 6107, The World Bank.

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    More about this item

    Keywords

    Microfinance; business training; adult education;
    All these keywords.

    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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