BUSINESS TRAINING OR TECHNICAL ASSISTANCE FOR FEMALE MICROENTREPRENEURS:

BUSINESS TRAINING OR TECHNICAL ASSISTANCE
FOR FEMALE MICROENTREPRENEURS:


LESSONS FROM TWO EXPERIMENTAL EVALUATIONS

Martin Valdivia


Conference "Women's Entrepreneurship: What do we
know? What is next?”


Washington D.C.,
April

6th, 2011

Structure of the presentation

•
Motivation: Teaching entrepreneurship to female
microentrepeneurs

•
This presentation: Analysis of two experimental
interventions for improving management capital for
female
microentrepreneurs

•
Research questions

•
Results and discussion

•
Remaining questions

Motivation I

•
Is it possible to transform a small trader/producer into a
successful businesswoman?

–
In the developing world, millions of people work in their own familiar
microbusinesses

(GEM, 2007)

–
Many of those families are still poor

•
Exclusion or use of opportunities? (Perry, et. al., 2007)

•
Entrepreneurship in Latin America reproduces gender
inequities (GTZ
-
BM
-
BID, 2010)

–
Female participation in labor force has increased a lot in the last
decades, but mainly in the informal sector

–
Female
-
run businesses tend to be smaller, less profitable and less
productive

Motivation II

•
Majority of
microbusinesses

have low returns to capital,
especially those female
-
run (de Mel, McKenzie y Woodruff,
2008)

–
Possibilities of business growth and sustainability are ambiguous

–
Contribution of this sector to poverty reduction and economic growth
is uncertain

•
Pro
-
microentrepreneurship

interventions have been tried
(microfinance, titling), but recent evidence showed they have
not been enough

–
Microfinance (
Banerjee

et. al., 2009; Karlan &
Zinman
, 2010)

–
Titling
(
Field

& Torero, 2005; Galiani &
Schargrodsky
, 2010)

Motivation

III

•
So, what else could be done to strengthen entrepreneurial
efforts by females?

–
If the problem is exclusion, firms may be inefficient

–
need to improve management capital available to these businesses
(Bruhn, Karlan &
Schoar
, 2010)

•
business training

•
Technical assistance

•
Or both?

–
In the case of women, need to include a gender approach to empower
the role of women within the household and in the community

What do we present here?

•
Lessons from two experimental evaluations:

•
Teaching entrepreneurship: Impact of business training on
microfinance clients and institutions, with Dean Karlan (forthcoming,
REStat

2011)

•
Training or Technical assistance for female
microentrepreneurs
?: an
experimental evaluation (first results, study in progress)

•
Driving research questions

•
Can entrepreneurship be taught, making a businesswoman succeed?

–
Is it intuition, determination?

–
Adoption of good business practices?

•
Need some concrete advice (technical assistance) to improve business
outcomes and consolidate new knowledge?

Characteristics of Study 1(FINCA)

•
A business training module was added to the financial
services of a MFI

–
We worked with
FINCA
-
Perú
, small but financially sustainable MFI
(village banking)

–
Serving
microentrepreneur

women in Lima and Ayacucho

–
Two modules (22 sessions, with
Atinchik
, FFH):

•
Module 1: what is a business, how does the market work, commercial
strategies

•
Module 2: separate account management (home
-
business), productions
costs calculation, prices

–
Half
-
hour sessions in the dates of their regular payment meetings, run
by previously trained FINCA promoters

–
Random assignment

of banks to treatment and control groups to
identify effects

•
Control group: business as usual for FINCA village banks

•
Marginal contribution of training on clients and MFIs

Characteristics of Study 2 (Consortium)

•
Study associated to the RBI project by WB
-
UNIFEM

–
Eligible female
microentrepreneurs

were called in the north and south
cone of Lima

–
Design and
execution

of training in charge of the consortium CEDLAS
-
CAPLAB
-
INPET

–
Three modules: personal development, business management,
productive development

•
Random selection of beneficiaries and control group from the
eligible interested population

–
T1


3
-
month regular training, 3 classroom group sessions of 3 hours
each week

–
T2


regular training plus technical assistance (AT)

–
C


nothing

Research questions

•
Key general questions

–
Can good business practices be taught to adult women with low
formal education level and, in some cases, low self
-
esteem?

–
Can the training contribute to the growth of the women
´
s business?

•
FINCA study

–
Can training help improve the outcomes of the MFI? (client retention,
repayment rate, loan size, etc.)

–
Should the MFIs provide business management training?

•
Consortium Study (how to provide training?)

–
Is there any difference when the training is provided by specialists?

–
Can traditional training be enough (transmission of good business
practices), or is a component of technical assistance required (more
specific advice to the businesses of these women)?

Results: do
microentrepreneurs
’ practices
change/ improve?

•
Yes, definitely

–
FINCA study: improved record keeping of inputs/outputs, separate
household and business accounts, reinvest more, think proactively
about business innovations and implement them

–
Consortium study: separate household and business accounts, close
non
-
profitable businesses/ open new businesses, participate more in
producers/ traders associations, seek more credits (specially from
informal sources)

•
According to the emphasis of each training

–
But not all recommended practices were adopted

Results: does it contribute to businesses
growth?

•
It seems general training is not enough, TA is needed

–
FINCA study: sales of the treated increased 15% more than those of
the control group, especially in “low” periods

•
Nevertheless, we cannot reject that this effect might be explained by
some structural differences

–
Consortium study: sales increased between 17%
-
20%, but only for
women who received full treatment (general training plus technical
assistance)

•
Could it be the effect of working with specialists in the
provision of training (Consortium)?

–
No, as women with just regular training in Consortium study do not
present any effects either

–
Instead, the effect is only significant when combining general training
with technical assistance

Discussion of key results

•
Policy implication:

–
Teaching general good business practices (GT) is cheaper and more
scalable, but TA is needed to help
microentrepreneurs

grow

–
Both effects are stronger in relatively larger businesses

•
Existence of a threshold from which this kind of intervention can help

•
But, can we really say that the full intervention (GT+TA) has
transformed beneficiaries in better businesswomen?

–
Not necessarily. Positive effects do imply there were inefficiencies
(room to improve) and specific advice was sound

–
Do not know whether the diagnosis and innovation process could be
replicated further without a third party’s help (subsidized or not)

•
If not, these
microentrepreneurs

would still be vulnerable to changes in
the economic context,

•
and their businesses’ growth and sustainability would still be uncertain

–
We can learn a lot from a second follow up.

Other key results:

•
Should a MFI provide business training? It is beneficial for the
MFI

–
Improves client retention

–
Reduces loan repayment problems of the members

•
Important: with joint liability, there are repayment problems that do not
affect directly the MFI accounts

•
But with joint liability, payment problems destabilize village banks, so
improvements in this indicator are good for the MFI

–
But things may still get complicated if TA is added

•
FINCA study provided training in a mandatory scheme

–
Who benefits the most?

–
Results in business practices and institutional outcomes are stronger
in those initially less interested in the training

–
Policy implication: demand
-
driven selection of beneficiaries would not
be the most appropriate choice

•
Free
-
trial periods and tied
-
sales would be more advisable

Remaining questions I: randomization and
effective treatment

•
Consortium study: only 50% of the selected beneficiaries
accepted to start the training program, and only 305 reached
75% of it.

–
In the FINCA study that selectivity was also true, because of clients
dropping out of village banks

–
In any case, ITT estimator is relevant if programs work this way

–
A cost
-
benefit analysis that assumes perfect compliance is not useful

•
Nevertheless, it is crucial to try to see how to maximize
effective treatment

–
Connection between early childbearing/distance to training center
suggest time constraint is a key issue (childcare services, shorter/less
frequent sessions)

–
Other related adjustments: group invitations, use of ICTs may help
catch up after unavoidable absences

Remaining questions II: external validity

•
Businesses in both studies are very small

–
FINCA study: average monthly sales of 800 soles

–
Consortium study: average weekly sales of 500 soles

•
This group is very important because it includes very poor
people

•
Nevertheless, it is valid to think that results could be different
for small and medium businesses

–
Pilot strategies like these should be implemented

–
It is likely that other restrictions may come as relevant

•
Formality costs, technological level


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