Matching or Cash Grants for Entrepreneurs: What is more Effective? Experimental Evidence from the Bagré Growth Pole Project in Burkina Faso.

Last registered on March 20, 2023

Pre-Trial

General Information

Title

RCT ID

AEARCTR-0004867

Initial registration date

October 16, 2019

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published

October 18, 2019, 10:56 AM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated

March 20, 2023, 6:56 AM EDT

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Country

Burkina Faso

Region

Centre-Sud

Primary Investigator

Name

Michael Grimm

Affiliation

University of Passau

Contact Primary Investigator

Other Primary Investigator(s)

PI Name

Sidiki Soubeiga

PI Affiliation

University of Passau

Contact Investigator

PI Name

Michael Weber

PI Affiliation

World Bank

Contact Investigator

Additional Trial Information

Status

On going

Start date

2018-11-01

End date

2023-07-31

Keywords

Finance & Microfinance, Firms & Productivity, Labor

Additional Keywords

Business plan competition, entrepreneurship, high-growth potential firms, jobs, Agricultural value-chains.

JEL code(s)

O12, D22.

Secondary IDs

Prior work

This trial does not extend or rely on any prior RCTs.

Abstract

Burkina Faso’s population and especially the workforce is rapidly growing. Although unemployment is low (0.6 percent), about 70 percent of Burkinabè work in low-productive agricultural activities. A key challenge for policymakers is to find effective interventions that create productive jobs for the youth. This research project seeks to provide rigorous evidence on the impacts of two private sector-based interventions – matching and cash grants – on the performance and employment by firms in agricultural value chains. These interventions provide alternative mechanisms of support to micro, small and medium-sized enterprises (MSMEs) located in a special agri-business development zone in rural Burkina Faso. The study makes use of a randomized controlled trial (RCT). It is embedded into the Bagré Growth Pole Project supported by the World Bank since 2011. The Government through the Maison de l’Entreprise du Burkina Faso (MEBF) implements it. The MEBF is a business association anchored in the Chamber of Commerce. The research hypothesis is that both interventions improve business outcomes, but cash grants are more effective than matching grants due to differences in their conditions of usage. Hence, the main questions are: (i) what is the impact of matching and cash grants on management skills, business practices, business development, turnover, profits, investment, firm survival and employment in beneficiary firms? (ii) how do both interventions compare along the different outcomes of interest and which of the two interventions is more cost-effective? (iii) do the interventions generate any positive externalities on other firms located in the Bagré Growth Pole area?

External Link(s)

Registration Citation

Citation

Grimm, Michael, Sidiki Soubeiga and Michael Weber. 2023. "Matching or Cash Grants for Entrepreneurs: What is more Effective? Experimental Evidence from the Bagré Growth Pole Project in Burkina Faso.." AEA RCT Registry. March 20. https://doi.org/10.1257/rct.4867-1.4

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Experimental Details

Interventions

Intervention(s)

The World Bank has been supporting the Government of Burkina Faso to develop a Growth Pole through the operationalization of the Bagré Growth Pole Project since 2011. The project intends to enhance critical soft and hard investments to provide the conditions for private investment and job creation. It is also supposed to generate significant spillover effects to the entire region. The primary target are agricultural/agribusiness value chains, including production and processing as well as businesses that provide inputs and services to these value chains. For this purpose, a matching grants scheme has financially supported newly set up and existing micro, small and medium enterprises (MSMEs) since 2012. The matching grants scheme aims to help MSMEs to access capacity building services to improve their productivity and enhance their labor demand. For comparison, a cash grants program is newly introduced in parallel. The main difference between cash and matching grant is that the use of the former is not limited to capacity building only, but it can be used for a broad range of needs of the firm including purchase of equipment and inventories.

Intervention Start Date

2019-04-01

Intervention End Date

2022-03-31

Primary Outcomes

Primary Outcomes (end points)

• Survival (firm still operating)
• Productivity (returns to capital, yields)
• Employment, days worked and wages paid

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)

• Profit, value added, turnover
• Investment (capital (equipment), land incl. farmland, inputs, inventory, construction, livestock)
• Management and other business skills and practices, incl. capacity to innovate
• Protective effects of cash and matching grants against Covid crisis
• Government savings in grants targeted at poor people (aggregated)

Secondary Outcomes (explanation)

Management skills and business practices will not only be analyzed indicator by indicator, but also through an aggreate index based on Principal Component Analysis.

Experimental Design

The impact study aims to make causal statements regarding the effects of matching and cash grants on business performance, productivity, and capacity to create jobs in enterprises. The study is designed as a randomized controlled trial (RCT) with three groups each with 400 entrepreneurs either beneficiaries of grants (matching or cash) or non-beneficiaries (the control group). Each beneficiary was allocated a grant amount up to US$ 8,000. The actual grant amount was determined from the business plan of every firm. The amount varies across firms, but all firms received their requested cash amount, which corresponds to the cost of inventory, working and physical capital budgeted in their business plans.

The selection started off with a business plan competition to shortlist 1,600 entrepreneurs located in nine municipalities within the project area. These were selected out of 2,200 applicants. In shortlisting participants in the different communities, women were particularly favored thanks to selection quotas. The elaborated targeting at entrepreneurs that have growth potential and a vision on how to develop their business distinguishes this policy experiment from many other previous experiments. All shortlisted entrepreneurs were trained on business management. The trainers delivered a standard and simplified training certified by the International Labor Organization (ILO). Although the relevance of the business plans guided the shortlisting of participants, the training intended to ensure that all participants would be able to implement their business plans if offered treatment. Noteworthy is that this training does not address the skills constraints specific to each eligible entrepreneur, so the matching grants remain a valuable asset for them.
The randomization was conducted through public lotteries held in the nine municipalities. To ensure cost-effectiveness and tailor the support to the actual needs of the firms, the randomization was performed within tranches of the requested cash grant amounts. This design ensured an identical distribution of the grant amounts in the groups of matching and cash beneficiaries.

The eligible activities as well as the disbursement rules are specific to each intervention. Thus, the impact assessment will not be able to disentangle the role of each single feature. The evaluation will rather assess the effects of each ‘intervention package’ along with their respective procedures of implementation.

Experimental Design Details

Randomization Method

Public lottery.

Randomization Unit

Firms.

Was the treatment clustered?

Experiment Characteristics

Sample size: planned number of clusters

N.A.

Sample size: planned number of observations

1200 firms

Sample size (or number of clusters) by treatment arms

400 firms

Minimum detectable effect size for main outcomes (accounting for sample design and clustering)

Power calculations show that a sample size of 400 firms per group allows detecting effects in the order of about 0.20 standard deviations, with at least 80% power. If the calculations account in addition for a reasonable amount of sample attrition (i.e. participants who are ‘lost’ between baseline and endline), the minimum detectable effect size increases to about 0.22 standard deviations. If a power of 90% is imposed the measurable effects increase to 0.23 and 0.26 standard deviations respectively. Controlling for baseline characteristics and using both the midterm and endline surveys together will further increase power.

Supporting Documents and Materials

IRB