Stimulating Managerial Capital in Emerging Markets: The Impact of Business and Financial Literacy for Young Entrepreneurs

Identifying the determinants of entrepreneurship is an important research and policy goal, especially in emerging market economies where lack of capital and supporting infrastructure often imposes stringent constraints on business growth. This paper studies the impact of a comprehensive business and financial literacy program on firm outcomes of young entrepreneurs in an emerging post-conflict economy, Bosnia and Herzegovina. The authors conduct a randomized control trial and find that while the training program did not influence business survival, it significantly improved business practices, investments, and loan terms for surviving businesses. Entrepreneurs with higher ex-ante financial literacy further exhibited some improvements in business performance and sales.

Bruhn and Zia (2013) UrbanRCTBusiness training with central theme of encouraging capital investment among young businesses. Six modules on basic business concepts, accounting skills, and business investment and growth strategies.Program significantly improved business practices (treatment 17% more likely to implement new production processes), investments (treatment 11% more likely to inject new investment into businesses) and loan terms for surviving businesses. Entrepreneurs with higher ex-ante financial literacy exhibited some improvements in business performance and sales (sub-group showed 54% increase in profits). The training program did not influence business survival or business entry by clients with exploratory loans.http://www.tandfonline.com/doi/abs/10.1080/19439342.2013.780090#.UcIlf-evPoI445 young entrepreneurs or potentials (35% women), larger than micro stratified by baseline financial literacy level, gender, industry and baseline products. One-third of sample did not own a business but had a business exploration loan.