Experimental Design Details
Individuals have been randomly selected and split into five different groups. 406 were assigned to the loans intervention, 401 to the loans and training, 167 to grants, 219 to grants and training, and 357 to the control group. The sample sizes were based on power calculations after taking into account implementation budget limitations.
A local microfinance organization, PRIDE Microfinance, provided the loans. Unknown to the participants, the loans were guaranteed by the ILO as the sample came from all businesses that expressed interest in a loan. These businesses may not have fit the lending requirements of PRIDE, and so a guarantee was decided upon to mitigate risk. PRIDE normally provides loans with an interest rate of 26% and requires 100% collateral. Lenders reduced the interest rate to 20% and described the program as a special promotion to individuals. For those who were not able to provide 100% collateral, PRIDE agreed to accept 50% collateral instead. This special promotion was designed to encourage participation in the loan program and to reflect what a subsidized loan program might be like if conducted in the future. Individuals were then required to repay the loan in monthly installments, starting in the first month.
The ILO delivered the cash grants through PRIDE bank accounts. The ILO then contacted individuals to attend information meetings explaining how the cash grant program would work. They were then asked to open a free savings account, where the money would be deposited.
The ILO conducted the trainings using the Start and Improve Your Business (SIYB) training modules. This training program reached 4.5 million people in 100 countries from 2003 to 2010. Researchers have evaluated the trainings experimentally twice before. First, Mano et al 2012 looked at the effect of giving training to 53 business owners. In keeping with other training results, they found survival rates increased, as did the incidence of good business practices such as keeping budgets, with no consistent effects on business profit. de Mel et al (2008) also use the SIYB training on female business training and cash grants in Sri Lanka. They found no effect on profits for those already in business for training, but some initial effect for the grants that disappears after the second year. There is also increased entry for those without business and some income growth. The trainings have thus been evaluated previously and have presented mixed results. It was decided not to pursue a pure training treatment arm, but instead use trainings as a potential augmenting effect on the use of cash grants and loans to test if training can increase the effects of decreasing capital constraints through better business management practices or attitudes.