90354 enGender Impact: The World Bank’s Gender Impact Evaluation Database Money or ideas ? A field experiment on constraints to entrepreneurship in rural Pakistan Author(s) Xavier Giné, Ghazala Mansuri Contact xgine@worldbank.org, gmansuri@worldbank.org Country Pakistan Organizing Theme Economic Opportunities and Access to Assets Status Completed Intervention Category Microfinance and business training Sector Finance and Private Sector Development This paper identifies the relative importance of human and physical capital for entrepreneurship. A subset of rural microfinance clients were offered eight full time days of business training and the opportunity to participate in a loan lottery of up to Rs. 100,000 (USD 1,700), about seven times the average loan size. The study finds that business training increased business knowledge, reduced business failure, improved business practices and increased household expenditures by about $40 per year. It also improved financial and labor allocation decisions. These effects are Abstract concentrated among male clients, however. Women improve business knowledge but show no improvements in other outcomes. A cost-benefit analysis suggests that business training was not cost-effective for the microfinance institution, despite having a positive impact on clients. This may explain why so few microfinance institutions offer training. Access to the larger loan, in contrast, had little effect, indicating that existing loan size limits may already meet the demand for credit for these clients. Gender Connection Gender Informed Analysis Employment, business operations, Expenditures and Assets, Outlook on Life, Gender Outcomes Decision-Making IE Design Clustered Randomized Controlled Trial The intervention offered microfinance clients in rural Pakistan an eight day business training course and access to a loan lottery where eligible clients can borrow up to 7 times the average loan size. Training sessions were held from February to May 2007 and focused on business planning, marketing and financial management. From November 2007 to June 2008 a lottery was introduced that allowed eligible Intervention members to apply for a loan of up to Rs 100,000 (1,667 USD at the time of the baseline). Loan requests were subject to the usual screening and amounts approved above the usual cycle limit were forwarded to headquarters, where the results of the lottery were maintained. Lottery winners could borrow the approved amount, while those who lost the lottery could borrow up to their maximum loan size, which depended on the number of loans they had previously repaid successfully. Intervention Period 2007-2008 Last updated: 2 September 2014 1 enGender Impact: The World Bank’s Gender Impact Evaluation Database 747 community organizations (CO) with 5-20 members in five branches in the disrticts of Bahawalpur, Hyderabad and Attock, spanning different agro-climatic Sample population regions of Pakistan. Most COs are segregated by gender. In the sample, there are 447 male COs (60 percent), 251 female COs (33.6 percent) and 49 mixed COs (6.5 percent). The offers of training and larger loans were implemented with a 2x2 design, assigning clients to one of four groups: (i) offered business training (BT) and Comparison assigned to be a lottery winner (LW), (ii) BT but no LW, (iii) no BT but LW and (iv) conditions no BT nor LW. By virtue of the design, one can thus test whether BT and LW had reinforcing effects. Unit of analysis Individual level Evaluation Period 2006-2009 We find that offering business training leads to increased business knowledge, better business practices and higher household expenditures. Business training also enhances group cohesion and improves the general outlook on life. These effects are mainly concentrated among male clients, however. Among men, business training also leads to lower business failure. Unlike men, women increase business Results knowledge but show no improvements in any other outcomes, particularly income and assets, business practices and business operations. While there are substantial differences between male and female clients, perhaps due to the different process by which they become both self-employed and clients, the inclusion of additional controls and their interactions with treatment dummies does not qualitatively affect the estimates. Primary study limitations Funding Source Development Research Group and Pakistan Poverty Alleviation Fund Giné, X., & Mansuri, G. (2014). Money or ideas ? A field experiment on constraints Reference(s) to entrepreneurship in rural Pakistan. World Bank Policy Research Working Paper No. 6959 Link to Studies http://www- wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2014/06/30/ 000158349_20140630163715/Rendered/PDF/WPS6959.pdf Microdata Last updated: 2 September 2014 2