Teaching entrepreneurship: Impact of business training on microfinance clients and institutions
Last registered on July 26, 2016

Pre-Trial

Trial Information
General Information
Title
Teaching entrepreneurship: Impact of business training on microfinance clients and institutions
RCT ID
AEARCTR-0001133
Initial registration date
July 26, 2016
Last updated
July 26, 2016 2:30 PM EDT
Location(s)
Region
Primary Investigator
Affiliation
Northwestern University
Other Primary Investigator(s)
PI Affiliation
Grupo de Ana´lisis para el Desarrollo
Additional Trial Information
Status
Completed
Start date
2002-10-01
End date
2005-11-30
Secondary IDs
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.
External Link(s)
Registration Citation
Citation
Karlan, Dean and Martin Valdivia. 2016. "Teaching entrepreneurship: Impact of business training on microfinance clients and institutions ." AEA RCT Registry. July 26. https://doi.org/10.1257/rct.1133-1.0.
Former Citation
Karlan, Dean, Dean Karlan and Martin Valdivia. 2016. "Teaching entrepreneurship: Impact of business training on microfinance clients and institutions ." AEA RCT Registry. July 26. http://www.socialscienceregistry.org/trials/1133/history/9588.
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Experimental Details
Interventions
Intervention(s)
Existing microcredit clients of FINCA Peru were provided business training during their weekly group banking meetings. Treatment groups received entrepreneurship training sessions and materials during their weekly meetings while comparison groups remained as they were before, meeting with the same frequency to make loan and savings payments.
Intervention Start Date
2002-10-01
Intervention End Date
2005-11-30
Primary Outcomes
Primary Outcomes (end points)
(1) business outcomes
(2) business processes and knowledge
(3) household outcomes including empowerment in decision making and child labor, and
(4) microfinance institutional outcomes.
Primary Outcomes (explanation)
(1) Business outcomes: measured through sales and number of workers employed
(2) Business processes and knowledge: tests whether the specific practices taught in the training were adopted. Examples of such practices include paying tax, paying salary to self, using profit for business growth etc.
(3) Household outcomes: household decision making and engagement of client’s own child in work.
(4) Microfinance Institutional outcomes: measured by loan size, client retention, cumulative savings
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
The experiment uses pre-existing banking groups in the districts of Ayacucho and Lima where banks are randomly assigned to control and treatment group. Randomization was stratified by credit officer; hence, each credit officer had the same proportion of treatment and control groups. Each group ran the training at its own pace thus different groups were exposed to different intensities of training.
The empirical analysis compared the village banks assigned to treatment to those assigned to control, regardless of how well the groups adhered to the training program, how well clients attended the training, and how long clients continued participating in the lending program. This is important not only to avoid a selection bias from heterogeneous intensity of treatment, but also because the delays experienced are representative of credit-with-education interventions.
Experimental Design Details
Randomization Method
randomization done in office by a computer, likely using Stata
Randomization Unit
Village banks
Was the treatment clustered?
Yes
Experiment Characteristics
Sample size: planned number of clusters
239 village banks
Sample size: planned number of observations
4,591 microfinance clients
Sample size (or number of clusters) by treatment arms
Control: 101 village banks
Mandatory participation in business training: 104 village banks
Voluntary participation in business training: 34 village banks
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
IRB Approval Date
IRB Approval Number
Post-Trial
Post Trial Information
Study Withdrawal
Intervention
Is the intervention completed?
Yes
Intervention Completion Date
November 30, 2005, 12:00 AM +00:00
Is data collection complete?
Yes
Data Collection Completion Date
November 30, 2005, 12:00 AM +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
Was attrition correlated with treatment status?
Yes
Final Sample Size: Total Number of Observations
3,457 clients
Final Sample Size (or Number of Clusters) by Treatment Arms
Control: 2,093 clients Treatment: 1,364 clients
Reports and Papers
Preliminary Reports
Relevant Papers
Abstract
TEACHING ENTREPRENEURSHIP: IMPACT OF BUSINESS TRAINING ON MICROFINANCE CLIENTS AND INSTITUTIONS

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.
Citation
Karlan, Dean, and Martin Valdivia. 2011. "Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions." The Review of Economics and Statistics 93(2): 510-527.