Small matching grants for women entrepreneurs: lessons from the past recession.

Abstract

During the economic slowdown caused by the financial crisis in 2008, grants for entrepreneurs were made available to support economic development. Whether such a policy instrument is effective for business development is a highly relevant question in the aftermath of the COVID-19. We evaluate the causal effects of small business development matching grants using a quasi-experimental approach. The grants were exclusively targeted to women entrepreneurs and provided during the recession after the financial crisis. Our findings demonstrate an increase in bank loans and a positive impact on turnover, value-added, capital, employment, and overall factor productivity for more experienced women entrepreneurs. As the grants are too small to have direct economic effects or indirect effects via the certification effect, they alleviate time and information constraints of women entrepreneurs. The cost-benefit analysis shows an increase in value-added that outweighs the scheme-related costs. Plain English Summary This study evaluates the effect of small public grants for women entrepreneurs. Grants were used for childcare and business consultancy costs to alleviate time and information constraints of women entrepreneurs. Benefiting from these grants resulted in higher bank loans. The women entrepreneurs on average invested more money in capital and had better performance measures like turnover and value-added. The effect was particularly evident among more experienced women entrepreneurs. The cost-benefit analysis shows grant-induced increase in value-added outweighs the scheme-related costs. The study implies small public grants for women entrepreneurs increase small firms’ growth, and these grants are in addition a cost-effective policy tool.