Over 14,000 business owners applied for a small business loan in response to Technoserve’s call for applications by filling in an application form that asked questions about the business and business owner background. Following the application window, 4,793 applicants were assigned to receive the training followed by the loan immediately (group 1), 4,252 were assigned to receive the training immediately and access to the loan 2 months following training (group 2), and 4,967 were assigned to receive the training followed by loan 4 months following group 1 and 2’s training (group 3).
Following randomization, just under 5,000 businesses dropped out of the program largely because of the training requirement. Of the remaining businesses, 3,272 are in group 1, 3,180 are in group 2, and 3,595 are in group 3.
Our design allows us to test the short-run effects of training, and how they vary by immediate access to financial capital in the form of loans. In particular, comparing changes in performance and business practices between groups 1 and 2 and group 3 before group 3 receives the training will provide an estimate of the effectiveness of business training. Moreover, comparing the performance and practice differences between those in groups 1 and 3 relative to changes between groups 2 and 3 will provide information about whether providing an input that is complementary to business training while the training is still fresh on business owners’ minds enhances the effectiveness of training.
Importantly, Technoserve did not want to deny training or loans to any businesses interested in taking them up, and had a limited window in which they needed to disburse the loans. Thus, the lag between group trainings and loan disbursements only allow us to measure short-run differences in performance and practices. However, whether any short-run effects lead to sustained benefits is also something we will test.
In order to be eligible for the loan, all participants had to complete a financial training module and pass a knowledge test. Participants were given access to other training modules on inventory management, supply chain management, marketing, and alternative revenue streams. Participants were assigned loans in the amounts they applied for.
As the training and knowledge tests were completed via phones (either through WhatsApp or SMS depending on what type of phone business owners possess), we are able to observe which modules they spent time on, and which knowledge tests they completed and how they scored.
A randomly selected subset of SMEs in each group was selected to participate in the baseline survey, and subsequently in the midline survey at the end of June, 2021. This survey and audit assessed business performance, loan status and use, and business expectations. An endline survey will be conducted by the end of year, 2021.