Entrepreneurship is a significant source of women’s economic opportunity – employment and income generation – for both urban and rural women in low-income countries. Women entrepreneurs may participate in a wide range of activities, from undertaking income generation projects in their homes, to selling products in open markets and the street, to owning or managing a business in a fixed location with one or more employees. Typical interventions to increase these women’s earnings include credit, savings and insurance vehicles; business training; technical assistance; women’s enterprises and women’s business networks.
Summary of Lessons
Simply put, capital alone, either as a small loan or grant, is not enough to grow women’s subsistence-level businesses.
Very poor women need more comprehensive services in order to break free from low-earning subsistence-level businesses, rather than single services or small levels of capital (in-kind, grants or loans).
Pairing a relatively high-value asset with specific business training and follow-up technical visits can expand occupational choices and increase earnings. While providing more services is often expensive up front, it leads to a greater standard of living and is also cost effective over time.
In Bangladesh, women who received a choice of a large asset (livestock valued at about USD $140) combined with specific training and follow up visits increased their earnings by 34 percent.
For women with larger, more profitable businesses, loans and grants (capital) yield larger profits, particularly when delivered inkind (e.g., in the form of inventory) so that there is less temptation to divert cash resources from the business for household uses.
Additionally, financial services delivered through mobile phones can effectively help women grow their businesses, because it allows women to keep their financial transactions private.
In Niger, households that received cash via mobile phones bought a wider variety of goods, spent less money during crisis periods and grew more types of crops than those receiving cash using other methods. The researchers hypothesized that these positive outcomes were the result of the low cost of using the mobile to transfer cash and the greater privacy the mobile gave women to elect how to spend the transfer.
Business training has been shown to improve business practices, but does not increase the profits of subsistence-level women-owned firms.
Increasing the quality and duration of training, providing follow-up customized technical assistance and targeting women running larger sized firms shows promise in helping women increase their earnings.
There is growing consensus that providing women and girls with access to reliable savings products is a smart investment that is proven to increase the earnings of self-employed women.
Female "empowerment" has increasingly become a policy goal, both as an end to itself and as a means to achieving other development goals. Microfinance in particular has often been argued, but not without controversy, to be a tool for empowering women. Here, using a randomized controlled trial, we examine whether access to and marketing of an individually-held commitment savings product leads to an increase in female decision-making power within the household.
We use randomized grants to generate shocks to capital stock for a set of Sri Lankan microenterprises. We find the average real return to capital in these enterprises is 4.6-5.3 percent per month (55-63 percent per year), substantially higher than market interest rates. We then examine the heterogeneity of treatment effects. Returns are found to vary with entrepreneurial ability and with household wealth, but not to vary with measures of risk aversion or uncertainty.
Most people in rural Africa do not have bank accounts. In this paper, we combine experimental and survey evidence from Western Kenya to document some of the supply and demand factors behind such low levels of financial inclusion. Our experiment had two parts. In the first part, we waived the fixed cost of opening a basic savings account at a local bank for a random subset of individuals who were initially unbanked. While 63% of people opened an account, only 18% actively used it.
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.
Does limited access to formal savings services impede business growth in poor countries? To shed light on this question, we randomized access to non-interest-bearing bank accounts among two types of self-employed individuals in rural Kenya: market vendors (who are mostly women) and men working as bicycle-taxi drivers. Despite large withdrawal fees, a substantial share of market women used the accounts, were able to save more, and increased their productive investment and private expenditures. We see no impact for bicycle-taxi drivers.
We report the results from a field experiment with a micro lender in Uganda to test the effectiveness of privately implemented incentives for loan repayment. Using a randomized control trial we measure the impact of three different treatments: Borrowers are either given a lump sum cash reward upon completion of the loan (equivalent to a 25% interest rate reduction on the current loan), a 25% reduction of the interest rate in the next loan the borrower takes from the bank, or a monthly text message reminder before the loan payment is due (SMS).
This study evaluates the impacts of a business training program serving female microentrepreneurs in Lima that have previously benefited with the titling of their urban parcels. The intervention included personal development, business management and productive skills, aiming at empowering women so that they improve the control of their lives, their access to credit, their business practices, which in turn would increase the income and welfare of their families. 1983 eligible women were randomly allocated to treatment (2) and control groups.
Recent studies have shown that the majority of the poor lack access to formal banking services of any kind (Banerjee and Duflo (2007), Collins et al. (2009)) and have emphasized the importance of enabling savings. A simple savings account was randomly offered to poor female household heads through local bank-branches in 17 slums in Nepal. 81% of the individuals offered the account took it up and 78% used it actively.
We test the effectiveness of self-help peer groups as a commitment device for pre- cautionary savings, through two randomized field experiments among 2,687 micro- entrepreneurs in Chile. The first experiment finds that self-help peer groups are a powerful tool to increase savings (number of deposits grows 3.5-fold and average savings balance almost doubles). Conversely, a substantially higher interest rate has no effect on most participants.
Microfinance supports mainly informal activities that often have a low return and low market demand. It may therefore be hypothesized that the aggregate poverty impact of microfinance is modest or even nonexistent. If true, the poverty impact of microfinance observed at the participant level represents either income redistribution or short-run income generation from the microfinance intervention. This article examines the effects of microfinance on poverty reduction at both the participant and the aggregate levels using panel data from Bangladesh.