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

Entrepreneurship training: Impact on economic outcomes for the poor
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This paper examines the issue of integrating education with microfinance for improved business outcomes. Many microfinance institutions (MFIs) have adopted credit with education integrated model of microfinance. The goal of intervention is to improve:

  • Business outcomes and overall welfare of clients;
  • Institutional outcomes for the microfinance institution.

However, the paper argues that not much is known about the marginal impact of these non-financial services (education). It presents a study to address this gap:

  • To evaluate the impact, pre-existing lending groups were randomly assigned to control and treatment groups.
  • Treatment groups received thirty to sixty minute entrepreneurship training sessions during their weekly group banking meetings.
  • The trainings lasted for one to two years.

The findings of the study are that Credit with Education:

  • Increases the repayment and client retention rates for MFIs;
  • Improves business knowledge and practices of clients;
  • Has positive impact on average business revenue of the client as well as business revenue in bad months of the client.

About this Publication

By Karlan, D. & Valdivia, M.