Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions

A business skills training program for female microfinance clients in Peru had little effect improving business performance and did not increase women’s decision making power at home.


Microfinance – financial services for low-income individuals – is an increasingly common tool for poverty alleviation, helping entrepreneurs meet their basic financial needs. Peru began its microcredit efforts in the 1970s, and since then it has developed a robust microfinance industry regarded as a model of success for the rest of Latin America. Today, more than half of Peruvian microcredit recipients are females. While these services provide many women with the ability to access loans, they rarely include entrepreneurial skills trainings. In combination with the microloan, this training could maximize loan recipients’ small business profits and success. Because of this increased knowledge and/or financial power, women might also leverage their economic contribution to the household for more control in family decision-making. In this study, researchers investigate the effects of including business skill-trainings into the operations of a regular microcredit program. The training, taught by loan officers at weekly repayment meetings, included topics such as: client relations, profit management, use of sales and discounts, product selection and separation of household and business finances. Researchers sought to determine whether this additional training improved business performance, reduced child labor, increased loan repayment and client retention for the microfinance institution (MFI), or shifted household decision-making power to women.


Skills training with female microloan recipients in Peru improved MFI client retention rates, had small positive impacts on selected business practices, but negligible effects on other measures of profitability and business performance:

  • No significant effects were found for number of workers hired or in profit margins for retail businesses.
  • In some specifications, there was a weak positive  effect on business profits, particularly in terms of managing downward spirals in sales, thus reducing the negative impact of “bad” months.
  • In the treatment group, participants were more likely to apply their training to activities such as record keeping on withdrawals, using profits for business growth, and applying new innovations to the business model. There were no effects on other activities like paying themselves a fixed salary, tax formality or keeping records of payments to employees.
  • Perfect repayment of the microloan was 3 percentage points higher in the treatment group than the control group (but the effects are statistically weak).
  • Individuals in the treatment group were 4 percentage points less likely to drop out from the microfinance program than individuals in the control group.
  • There was no effect on household decision-making or increased female empowerment within the household. However, this may be due to the fact that the intervention was with women who were already business owners and therefore had some established financial power before the intervention. The training did not increase record keeping with household bills or cause heads of households to keep separate finances.

This training program in Peru had some small positive effects on female entrepreneurs’ ability to manage profit fluctuations, it also improved some of their business practices and increased their likelihood to stay in the microfinance program . Overall, it had no significant effect on household decision making, female agency within households or child labor.


The business skills training took place in two areas where the microfinance institution FINCA sponsored village lending institutions: Ayacucho and Lima. In Ayacucho,55 village banks were randomly selected to have treatment groups take part in mandatory weekly training classes as part of the repayment process. Another 34 banks were chosen to host a second treatment group who were told they could voluntarily attend the training.  Finally, 51 Ayacucho banks were randomly assigned to host the control group, who did not received skills training.  In Lima, 49 banks hosted the mandatory group, and 50 were assigned the control group.  Lima banks had no voluntary group.  Researchers collected baseline survey data before the start of the skills training in 2002 in Lima and in 2003 in Ayacucho. The groups were randomized in such a way that each credit officers engaged with an equal number of treatment and control group members.  Banks with mandatory training programs saw 88% attendance, while the voluntary training had 76% attendance. Trainings did not happen at each repayment meeting, and were also suspended if there was a holiday, a group celebration, and on the first and last day of each meeting cycle.

Two years after the trainings had started, a follow-up survey was administered to business owners.  Additional financial data was obtained from FINCA’s records.  Researchers were able to complete follow-up surveys with 76% of baseline respondents.

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