Growing Markets through Business Training for Female Entrepreneurs: A Market-Level Randomized Experiment in Kenya

David Mckenzie,Susana Puerto

doi:10.1257/app.20180340

Abstract

A common concern with efforts to directly help some small businesses to grow is that their growth comes at the expense of their unassisted competitors. We test this possibility using a two-stage randomized experiment in Kenya that randomizes business training at the market level and then within markets to selected businesses. Three years after training, the treated businesses are selling more, earn higher profits, and their owners have higher well-being. Point estimates of the spillovers on the competing businesses are small and not statistically significant, and the markets as a whole have grown in terms of sales volume. (JEL J16, L25, L26, L53, O14)

Highlights

Governments and NGOs around the world promote and offer a variety of direct support to small businesses, with the provision of business training one of the most common services provided
This concern is apparent when working with microenterprises in rural markets in developing countries, where it is easy to believe that if firms are all selling similar products in a small market, any extra sales made by trained firms must come from competing away these sales from neighbouring untrained firms
We conduct a randomized experiment in 157 rural markets in Kenya to test how business training (the International Labour Organization (ILO)’s Gender and Enterprise Together program) affects the profitability, growth and survival of female-owned businesses, and to evaluate whether any gains in profitability come at the expense of other business owners

Summary

Introduction

Governments and NGOs around the world promote and offer a variety of direct support to small businesses, with the provision of business training one of the most common services provided. McKenzie and Woodruff (2014) review this literature and note that overall evidence on effectiveness is mixed, in part because many studies have low statistical power and measure impacts over short durations This existing literature suggests that business training may be less effective for female business owners, either because they work in sectors with very low efficient scales or because they face many other constraints that limit the ability of their businesses to grow (e.g. de Mel et al, 2014; Berge et al, 2015; Giné and Mansuri, 2016). The one exception is Calderón et al (2013), who worked with 17 villages in rural Mexico, assigning 7 to treatment and 10 to control They find no significant spillovers, this may in part reflect low statistical power given the small number of villages and that they lose 18 percent of their sample to attrition and 41 percent to closure by their second follow-up. The remainder of the paper is structured as follows: Section 2 discusses the selection of our sample and randomization procedure; Section 3 the training and mentoring interventions; Section 4 our data collection and estimation approach; Section 5 impacts on primary and secondary outcomes; Section 6 mechanisms for these results; Section 7 cost-effectiveness; and Section 8 concludes

Methods

Findings

Discussion

Conclusion