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Money or ideas ? a field experiment on constraints to entrepreneurship in rural Pakistan

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  • Gine, Xavier
  • Mansuri, Ghazala

Abstract

This paper identifies the relative importance of human and physical capital for entrepreneurship. A subset of rural microfinance clients were offered eight full time days of business training and the opportunity to participate in a loan lottery of up to Rs. 100,000 (USD 1,700), about seven times the average loan size. The study finds that business training increased business knowledge, reduced business failure, improved business practices and increased household expenditures by about $40 per year. It also improved financial and labor allocation decisions. These effects are concentrated among male clients, however. Women improve business knowledge but show no improvements in other outcomes. A cost-benefit analysis suggests that business training was not cost-effective for the microfinance institution, despite having a positive impact on clients. This may explain why so few microfinance institutions offer training. Access to the larger loan, in contrast, had little effect, indicating that existing loan size limits may already meet the demand for credit for these clients.

Suggested Citation

  • Gine, Xavier & Mansuri, Ghazala, 2014. "Money or ideas ? a field experiment on constraints to entrepreneurship in rural Pakistan," Policy Research Working Paper Series 6959, The World Bank.
    • Handle: RePEc:wbk:wbrwps:6959
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    2. M. Mehrab Bakhtiar & Gautam Bastian & Markus Goldstein, 2022. "Business Training and Mentoring: Experimental Evidence from Women-Owned Microenterprises in Ethiopia," Economic Development and Cultural Change, University of Chicago Press, vol. 71(1), pages 151-183.
    3. Tim Kaiser & Lukas Menkhoff, 2017. "Does Financial Education Impact Financial Literacy and Financial Behavior, and If So, When?," The World Bank Economic Review, World Bank, vol. 31(3), pages 611-630.
    4. Buvinic, Mayra & Furst-Nichols, Rebecca, 2014. "Promoting women's economic empowerment : what works ?," Policy Research Working Paper Series 7087, The World Bank.
    5. Elert, Niklas & Andersson, Fredrik W. & Wennberg, Karl, 2015. "The impact of entrepreneurship education in high school on long-term entrepreneurial performance," Journal of Economic Behavior & Organization, Elsevier, vol. 111(C), pages 209-223.
    6. McIntosh, Craig & Zeitlin, Andrew, 2022. "Using household grants to benchmark the cost effectiveness of a USAID workforce readiness program," Journal of Development Economics, Elsevier, vol. 157(C).
    7. Brixiová, Zuzana & Kangoye, Thierry, 2016. "Gender and constraints to entrepreneurship in Africa: New evidence from Swaziland," Journal of Business Venturing Insights, Elsevier, vol. 5(C), pages 1-8.
    8. Huis, Marloes & Lensink, Robert & Vu, Nhung & Hansen, Nina, 2019. "Impacts of the Gender and Entrepreneurship Together Ahead (GET Ahead) training on empowerment of female microfinance borrowers in Northern Vietnam," World Development, Elsevier, vol. 120(C), pages 46-61.
    9. Farzana Misha & Syeda Sitwat Shahed & Natascha Wagner & Arjun Bedi, 2022. "Building resilience in the chars of Bangladesh: An impact assessment," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(8), pages 1547-1569, November.
    10. Helke Seitz, 2020. "Subgroup Analysis of Investment Constraints: Evidence from Ugandan Microenterprises," Discussion Papers of DIW Berlin 1920, DIW Berlin, German Institute for Economic Research.
    11. David Alfaro‐Serrano & Tanay Balantrapu & Ritam Chaurey & Ana Goicoechea & Eric Verhoogen, 2021. "Interventions to promote technology adoption in firms: A systematic review," Campbell Systematic Reviews, John Wiley & Sons, vol. 17(4), December.
    12. Valdivia, Martín, 2015. "Business training plus for female entrepreneurship? Short and medium-term experimental evidence from Peru," Journal of Development Economics, Elsevier, vol. 113(C), pages 33-51.
    13. Ahmed Elsayed & Soiliou Daw Namoro & Rania Roushdy, 2022. "Empowering women in conservative settings: evidence from an intervention in rural Egypt," Review of Economics of the Household, Springer, vol. 20(4), pages 1287-1322, December.
    14. Figal Garone, Lucas & López Villalba, Paula A. & Maffioli, Alessandro & Ruzzier, Christian A., 2020. "Firm-level productivity in Latin America and the Caribbean," Research in Economics, Elsevier, vol. 74(2), pages 186-192.
    15. Nagel, Hanskje & Rosendahl Huber, Laura & Van Praag, Mirjam & Goslinga, Sjoerd, 2019. "The effect of a tax training program on tax compliance and business outcomes of starting entrepreneurs: Evidence from a field experiment," Journal of Business Venturing, Elsevier, vol. 34(2), pages 261-283.
    16. M. Shahe Emran & A. K. M. Mahbub Morshed & Joseph E. Stiglitz, 2021. "Microfinance and missing markets," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 34-67, February.

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    Keywords

    Access to Finance; Competitiveness and Competition Policy; Business in Development; Business Environment; E-Business;
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