Paper
Teaching Entrepreneurship: Experiments to Improve Microfinance (BASIS Brief #47)
Can MFIs expand financial services access by offering microfinance clients entrepreneurial training?
4 pages
This paper discusses the impact of offering entrepreneurial training to microfinance clients.
The paper presents the importance of randomized control trials including:
- Allowing MFIs to reach an untapped market by building evidence on program designs that achieve higher profitability;
- Helping MFIs refine their business practices to improve their portfolio as well as allowing the poor gain access to credit;
- Launching an innovation at low cost and allowing for modifications to be made before scaling up.
The paper describes one such randomized control trial to evaluate the effectiveness of integrating business training with microfinance services. It presents analysis based on four categories:
- Institutional outcomes;
- Business skills and practices;
- Business outcomes;
- Household outcomes including empowerment in decision making and child labor.
The paper highlights results of business training on clients as follows:
- Appearing more satisfied with the organization;
- Demonstrating better business practices and knowledge;
- Generating higher and smoother business revenues.
It also elucidates the importance of training from the institutional perspective as under:
- Improved client retention rate;
- Lower enforcement costs due to higher repayment rates;
- Generation of more profits than the marginal cost of providing the training.
The paper concludes by delving into further experimentation to answer questions about optimal implementation of the training program.
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