Entrepreneurship


Original abstracts from the papers in the database are provided below. All abstracts are drawn directly from the papers referenced. Links to access the papers are provided, although
the papers may also be available from other web sources. By providing links to other sites, the United Nations Foundation and ExxonMobil Foundation do not guarantee, approve, or endorse the information or products available on these sites.

  • Impact of Microcredit in Rural Areas of Morocco: Evidence from a Randomized Evaluation

    Crepon et al (2011)

    Original abstract:

    Microcredit has rapidly expanded in the past years, providing access to financial services to a large population previously excluded from the financial system. However, whether it helps the poor has been a subject of intense debate on which, until very recently, there was no rigorous evidence. This paper reports the results of a randomized experiment designed to measure the impact of microcredit in rural areas of Morocco. Within the catchment areas of new MFI branches opened in areas that had previously no access to microcredit, 81 pairs of matched villages were selected. The treatment villages, randomly selected within each pair, were offered microcredit just after Al Amana opened the branch, while the control villages were offered access only two years later. Al Amana program increased access to credit significantly. Its main effect was to expand the scale of existing self-employment activities of households, for both non-livestock agriculture and livestock activities. We find little or no effect on average consumption as well as on other outcomes such as health, education, etc. However, treatment effects are heterogeneous depending on whether the households had an existing self-employment activity at baseline. Households that had a pre-existing activity decrease their non-durable consumption and consumption overall, as they save and borrow to expand their activities. Households that had not a pre-existing activity increase food and durable expenditure and no effects on business outcomes are observed.

    Intervention settings: Rural

    Intervention description: A randomly selected half of 82 paired villages in the catchment areas of newly opened microfinance branches with no previous access to microcredit were offered microcredit (group liability loans), with the remaining villages receiving the same offer two years later.

    Methodology: RCT

    Sample: 4,495 households in 80 pairs of villages.

    Findings: 13% increase in HH having a microfinance loan in the treatment villages. Both livestock and non-livestock agricultural activities expanded in the treatment villages (limited to households with a business activity pre-intervention). No effect on average household consumption, poverty or on other outcomes such as health and education. The majority of borrowers were men, and there was no measurable effect on women's empowerment.

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  • Microcredit in Theory and Practice: Using Randomized Credit Scoring for Impact Evaluation

    Karlan and Zinman (2011)

    Original abstract:

    Microcredit institutions spend billions of dollars fighting poverty by making small loans primarily to female entrepreneurs. Proponents argue that microcredit mitigates market failures, spurs micro-enterprise growth, and boosts borrowers' well-being. We tested these hypotheses with the use of an innovative, replicable experimental design that randomly assigned individual liability microloans (of $225 on average) to 1601 individuals in the Philippines through credit scoring. After 11 to 22 months, we found evidence consistent with unmet demand at the current price (a roughly 60% annualized interest rate): Net borrowing increased in the treatment group relative to controls. However, the number of business activities and employees in the treatment group decreased relative to controls, and subjective well-being declined slightly. We also found little evidence that treatment effects were more pronounced for women. However, we did find that microloans increase ability to cope with risk, strengthen community ties, and increase access to informal credit. Thus, microcredit here may work, but through channels different from those often hypothesized by its proponents.

    Intervention settings: Urban

    Intervention description: Individual credit with median loan size of $220, 37% of average borrower's net monthly income. Assessed impact of offering access to individual loans to marginal clients who otherwise would have been rejected.

    Methodology: RCT

    Sample: Less poor microentrepreneurs (incomes higher than poverty line)

    Findings: Credit enabled clients to better manage economic risk. No conclusive evidence on business revenue. Negative impact on number of businesses of both women and men clients. Negative effect on the number of employees of both women and men clients.

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  • Impact of Microcredit in RuralAreas of Morocco: Evidence from a RandomizedEvaluation

    Crèpon et al (2011)

    Original abstract:

    Microcredit has rapidly expanded in the past years, providing access to financial services to a large population previously excluded from the financial system. However, whether it helps the poor has been a subject of intense debate on which, until very recently, there was no rigorous evidence. This paper reports the results of a randomized experiment designed to measure the impact of microcredit in rural areas of Morocco. Within the catchment areas of new MFI branches opened in areas that had previously no access to microcredit, 81 pairs of matched villages were selected. The treatment villages, randomly selected within each pair, were offered microcredit just after Al Amana opened the branch, while the control villages were offered access only two years later. Al Amana program increased access to credit significantly. Its main effect was to expand the scale of existing self-employment activities of households, for both non-livestock agriculture and livestock activities. We find little or no effect on average consumption as well as on other outcomes such as health, education, etc. However, treatment effects are heterogeneous depending on whether the households had an existing self-employment activity at baseline. Households that had a pre-existing activity decrease their non-durable consumption and consumption overall, as they save and borrow to expand their activities. Households that had not a pre-existing activity increase food and durable expenditure and no effects on business outcomes are observed.

    Intervention settings: Rural.

    Intervention description: Group-liability credit.

    Methodology: RCT, tested impact of new MFI branches and rigorous.

    Sample: Majority are poor men; small sub-sample of poor women.

    Findings: Increased revenues, profits and number of employees of clients' existing non-livestock agricultural businesses (no impact on non-agricultural enterprises).Expanded scale of existing HH self-employment activities. No impact on new business creation or hours spent in self-employment. Higher earnings from business offset by lower income from wage labor. No significant impact on total per capita expenditure (point estimate negative). Mixed results on HH entrepreneurial engagement: positive impact on scale of activities, and in revenues/income from non-livestock agricultural activity only. No impact on women's empowerment; poverty or average per capita short-term consumption; HH likelihood of starting a new business; number of HH activities managed by women, women's decision-making power within HH or women's mobility. Lower earnings from wage labor, suggesting lower labor supply into wage-work.

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

    Karlan, Dean and Martin Valdivia (2011)

    Original abstract:

    Can one teach basic entrepreneurship skills, or are they fixed personal characteristics? Most academic and development policy discussions about microentrepreneurs focus on their access to credit, and assume their human capital to be fixed. The self-employed poor rarely have any formal training in business skills. However, a growing number of microfinance organizations are attempting to build the human capital of micro-entrepreneurs 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 that the treatment led to improved business knowledge, practices and revenues. The program also improved repayment and client retention rates for the microfinance institution. Larger effects found for those that expressed less interest in training in a baseline survey. This has important implications for implementing similar market-based interventions with a goal of recovering costs.

    Intervention settings: Urban and Rural.

    Intervention description: Freedom From Hunger training program. Measure marginal impact of adding business training to a Peruvian group lending program for female microentrepreneurs. 30-60 minute entrepreneurship training sessions during normal weekly or monthly banking meeting over 1-2 years. Controls held meetings as frequently but only for loan/savings payments.

    Methodology: RCT.

    Sample: Female microfinance clients.

    Findings: Improved business knowledge and client retention rates. Using difference in differences estimation there is some evidence that training may reduce downward fluctuations in sales (26% higher in 'bad' months). Little or no evidence of changes in business revenue, profits or employment.

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  • Household Decision Making and Savings Impacts: Further Evidence from a Commitment Savings Product in the Philippines

    Ashraf, Karlan and Yin (2006)

    Original abstract:

    Commitment devices for savings could benefit those with self-control as well as familial or spousal control issues. We find evidence to support both motivations. We examine the impact of a commitment savings product in the Philippines on household decision making power and self- perception of savings behavior, as well as actual savings. The product leads to more decision making power in the household for women, and likewise more purchases of female-oriented durable goods. We also find that the product leads women who appear time-inconsistent in a baseline survey to self-report being a disciplined saver in the follow-up survey. For impact on savings balances, we find that the 81% increase in savings after one year did not crowd out savings held outside of the participating bank, but that the longer-term impact over two and a half years on bank savings dissipated to only a 33% increase, which is no longer statistically significant. We discuss reasons why the effect dissipated and the implications for designing and implementing sustainable, equilibrium-shifting interventions.

    Intervention settings: Rural: greater Butuan City.

    Intervention description: Treatment group received a lock box for their savings that they were not allowed to open until they had met their savings goals.

    Methodology: RCT.

    Sample: 1,777 Green Bank clients (1,635 in follow-up) with savings accounts in two branches with identifiable addresses. 60% female and 77% married.

    Findings: Household savings increased by 81% after one year (without crowding out other savings). Decision-making power also increased significantly in the treatment group (especially among married women with below-median decision-making power pre-intervention). After 32 months, administrative data indicate that the effect on household savings was no longer significant.

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