Money or Ideas? A Field Experiment on Constraints to Entrepreneurship in Rural Pakistan

Asia

Pakistan

Labour Market

Business training and capital transfer

Giné, X. and G. Mansuri

2011

Giné, X. and G. Mansuri. 2011. “Money or Ideas? A Field Experiment on Constraints to Entrepreneurship in Rural Pakistan.” Working Paper.2
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2011

National Rural Support Program (NRSP)

N.A.

N.A.

This paper reports on a field experiment that offered microfinance clients in rural Pakistan an eight day business training course and access to a loan lottery. All members of a selected group of community organizations were, in principle, eligible to participate in the business training. Members were eligible for access to the loan lottery if they were borrowers “in good standing”, i.e. if they had repaid at least one loan on time and had no overdue loans.

The business training sessions were based on the “Know About Business” modules designed by the International Labor Organization. Loan lottery winners could borrow up to 7 times the average loan size.

• Business outcomes: various measures such as business knowledge, business practices, and sales and profits.
• Education: enrollment and absence in the last school day
• Child labour: work for pay

Randomized trial

Study design: NRSP provides uncollateralized microloans to individual clients who are required to become members of a community organization. A total of 747 community organizations was selected for the study. Half of these community organizations was randomly assigned to receive business training while the rest was assigned to the control group.
While the business training sessions were being conducted, eligible community organization members (both in treatment and control communities) were informed that they could request a loan of up to Rs. 100,000 (more than three times the regular maximum loan size). A lottery was designed such that the chance of the request being approved was 50 percent. Lottery winners could borrow the approved amount, while those who lost could borrow the regular loan amount.
Data: The study relies on administrative records on loan take-up, baseline survey data collected in 2006 and follow-up survey data collected in 2008, roughly a year and a half after the completion of the business training and 6 months after the completion of the loan lottery.

Business training led to increased business knowledge, better business practices, but no change in business sales or profits. Winning the loan lottery has limited effects on micro-clients, possibly because the initial loan size already met the demands of the borrowers. The effects of the business training intervention on education and child labour (of children aged 9-15) are not statistically significant in the full sample. However, girls in this age range appear to have increased their participation in work. Child labour is not affected among children living in households that won the loan lottery. They do exhibit an increase in absence during the last school day.

Child Labour

Individuals

Local

The effects of a business training intervention on child labour (of children aged 9-15) are not statistically significant in Pakistan. However, girls in this age range appear to have increased their participation in work. Child labour is not affected among children living in households that won the loan lottery.

Business training led to increased business knowledge, better business practices, but no change in business sales or profits. Winning the loan lottery has limited effects on micro-clients, possibly because the initial loan size already met the demands of the borrowers. The effects of the business training intervention on education (of children aged 9-15) are not statistically significant in the full sample. They do exhibit an increase in absence during the last school day.

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