Business training plus for female entrepreneurship? Short and medium-term experimental evidence from Peru
Two experimental business development programs for female microentrepreneurs in Lima, Peru showed that both women in the group that received general training and those in the group that received general training in addition to technical assistance experienced increased sales revenues and significant growth two years after the end of the treatment programs.
Given that previous research has increasingly demonstrated that microfinance alone cannot increase the growth of microbusinesses and launch microentrepreneurs out of poverty, it is essential to learn if microentrepreneurs can be made out of small traders and producers. Previous studies have found that business training programs may improve the likelihood of business success by teaching entrepreneurial skills, but they offer mixed results in their approaches and methodologies. This study presents a novel experimental intervention that reports short and medium-term effects for its participants by allowing the interventions sufficient time to realize the full effects of these interventions.
This study investigated the effect of two variants of a business training program on the performance of female-owned micro-enterprises to determine whether lack of managerial capital was the main constraint for microbusiness growth. Specifically, the study looked at whether transmitting general best practices was sufficient to encourage success, or whether additional technical assistance programs were more beneficial. The randomized controlled trial consisted of two intervention arms: a general training arm (GT) and a technical assistance (TA) arm. The GT consisted of a business training curriculum focused on general best practices for micro-entrepreneurs (e.g., personal development, business development and management, and productivity improvements). This training was delivered three times per week in three-hour sessions (for a total of 36 sessions). The TA intervention included the GT plus a technical assistance component for an additional 3 months, where a consultant provided specific support and customized recommendations to each microenterprise, as well as group sessions, self-help groups, and investment groups where female microentrepreneurs with similar interests could support each other.
In this study, business development training increased female microentrepreneurs’ sales by more than 15% in both normal and bad months about two years after the end of the 12-week training.
- Sales effects were not initially present for the GT-only group in the first follow-up (7-10 months after the training), but the two groups showed indistinguishable growth in sales by the second follow up (19-25 months after the training). Significantly, the second follow-up demonstrated a more robust effect for those participants that were offered only the general training component, without which the author may have erroneously concluded that this training was not effective.
- Offering technical assistance to complement the long and specialized business training did not make a difference on self-reported sales or productivity measures in the long run.
- Sales revenue effects were accompanied by the adoption of some business practices recommended during the training (product diversification and regular sales campaigns), especially among entrepreneurs who received both general training and technical assistance, but also among larger firms that only received general training.
This study suggests that highly intensive training delivered by experts is effective to increase sales for microentrepreneurs. It also found that management capital – the know-how and tools of management – was a binding constraint for business growth for microfirms in Lima, Peru, and that better profits and closing lines of credit used for start-up capital could be achieved by providing female entrepreneurs with the right support. However, due to the time-intensive nature of the study, retention and take-up were low, so the author suggests making the training intervention more time-efficient or flexible to enable those who missed sessions to retake them.
This randomized controlled trial was conducted among a sample of female entrepreneurs in Lima, Peru. Eligibility was based on 1) a woman having a family business, and 2) having a titled plot, and 3) expressing interest in participating in the training program. The research participants were recruited from Lima’s largest districts (Comas, Independencia, Villa El Salvador, and San Juan de Miraflores) with the help of the training institutions and local government officials. Recruitment was conducted via local radio and newspaper ads, as well as visits to individuals’ businesses. It occurred in two rounds: the first in February 2009 in the northern cone of Lima (Comas and Independencia), and the second in September 2009 in the southern cone (Villa El Salvador and San Juan de Miraflores). A total of 1,979 female entrepreneurs participated in the study and were randomly assigned to one of three groups: the general training (GT) group (711 individuals), general training and technical assistance group (703), and the control group, which received no training (565).
The GT included 1) a female empowerment module; 2) tools for new businesses, innovations, marketing and sales strategies, and costing; and 3) tools to improve customer service and production hygiene and productivity. The TA group received the same three modules but with more specific support based on the characteristics of the women’s businesses and their needs, and included individual and group visits. The TA group also received a digital literacy module and support for forming investment groups.
A baseline survey was administered to all research participants prior to the random assignment. Soon after, 1,414 participants were invited to start the training, having already been randomized to either the GT or GT + TA condition. 722 (51%) of invited participants accepted and started the general training (GT), and 28% of the GT program participants completed at least 30 sessions (75% of sessions). A week before the end of the general training, the randomization was disclosed, and only those who had started the general training in the GT + TA group were invited to the TA component. The dropout rate was much lower, with 53% (72 microentrepreneurs) of the TA program participants completing at least 75% of the training sessions.
The first follow-up survey of all groups – 1,624 participants in total (control, GT, and GT + TA) – was conducted from March to November 2010, about 7-10 months after the end of the general training component. For the group that received additional technical assistance, the intervention continued for three more months. The second follow-up survey of the remaining 1,600 participants went from October to December of 2011, giving the first cohort 27-30 months since the end of the training component.