Teaching entrepreneurship: Impact of business training on microfinance clients and institutions

Dean Karlan*, Martin Valdivia

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

243 Scopus citations

Abstract

Most academic and development policy discussions about microentrepreneurs focus on credit constraints and assume that subject to those constraints, the entrepreneurs manage their business optimally. Yet the self-employed poor rarely have any formal training in business skills. A growing number of microfinance organizations are attempting to build the human capital of microentrepreneurs 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 group lending 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 little or no evidence of changes in key outcomes such as business revenue, profits, or employment. We nevertheless observed business knowledge improvements and increased client retention rates for the microfinance institution.

Original languageEnglish (US)
Pages (from-to)510-527
Number of pages18
JournalReview of Economics and Statistics
Volume93
Issue number2
DOIs
StatePublished - May 2011

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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