Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions

Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions

July 2006 | Dean S. Karlan, Martin Valdivia
This paper examines the impact of adding business training to a microfinance program in Peru, specifically focusing on female microentrepreneurs. The study uses a randomized control trial design, where pre-existing lending groups were randomly assigned to either a treatment group that received business training or a control group that did not. The training sessions, lasting 30 to 60 minutes, were integrated into weekly or monthly banking meetings over a period of one to two years. The results show that the treatment group demonstrated improved business knowledge, practices, and revenues. Specifically, they reinvested profits back into their businesses, maintained sales records, and made more proactive changes to their operations. The microfinance institution also benefited from higher repayment rates and client retention. Notably, the strongest effects were observed for clients who initially expressed less interest in the training, suggesting that demand-driven market solutions may not be as effective as charging for services. The study concludes that teaching entrepreneurship can lead to positive outcomes for both clients and institutions, but further experimentation is needed to verify these findings in different contexts.This paper examines the impact of adding business training to a microfinance program in Peru, specifically focusing on female microentrepreneurs. The study uses a randomized control trial design, where pre-existing lending groups were randomly assigned to either a treatment group that received business training or a control group that did not. The training sessions, lasting 30 to 60 minutes, were integrated into weekly or monthly banking meetings over a period of one to two years. The results show that the treatment group demonstrated improved business knowledge, practices, and revenues. Specifically, they reinvested profits back into their businesses, maintained sales records, and made more proactive changes to their operations. The microfinance institution also benefited from higher repayment rates and client retention. Notably, the strongest effects were observed for clients who initially expressed less interest in the training, suggesting that demand-driven market solutions may not be as effective as charging for services. The study concludes that teaching entrepreneurship can lead to positive outcomes for both clients and institutions, but further experimentation is needed to verify these findings in different contexts.
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Understanding Teaching Entrepreneurship%3A Impact of Business Training on Microfinance Clients and Institutions