Policy Brief Issue 22 PERSONAL INITIATIVE TRAINING LEADS TO REMARKABLE GROWTH OF WOMEN- OWNED SMALL BUSINESSES IN TOGO Authors: Francisco Campos, Michael Frese, Markus Goldstein, Leonardo GENDER Iacovone, Hillary Johnson, David McKenzie, Mona Mensmann INNOVATION LAB The Gender Innovation KEY MESSAGES Lab (GIL) conducts impact • Standard business training programs aim to boost the incomes evaluations of development interventions in Sub-Saharan of the millions of self-employed business owners in developing Africa, seeking to generate countries, by teaching accounting, marketing and other basic evidence on how to close business skills. However, research shows limited impacts of this the gender gap in earnings, traditional business training approach. productivity, assets and agency. The GIL team is • Through an experiment in Togo, we introduced the personal currently working on over initiative training program, a new and effective psychology-based 50 impact evaluations in 21 entrepreneurship training that outperforms traditional business countries with the aim of building an evidence base training. The personal initiative training increased firm profits in Togo by with lessons for the region. 30% relative to a control group, compared to no significant impacts from a traditional business training. The impact objective of GIL is increasing take-up of effective • Personal initiative training led to more than just a boost in profits policies by governments, for microentrepreneurs. After the training business owners were more development organizations and the private sector in order innovative, introduced new products, borrowed more and made larger to address the underlying investments. causes of gender inequality in Africa, particularly in terms • The personal initiative training was particularly effective for of women’s economic and female entrepreneurs, for whom traditional training has often social empowerment. The lab been ineffective. Women who received personal initiative training saw aims to do this by producing their profits increase by 40%, compared to 5% for traditional business and delivering a new body of training. evidence and developing a compelling narrative, geared towards policymakers, on what works and what does not work in promoting gender equality. http://www.worldbank.org/en/programs/africa-gender-innovation-lab There has been a long-running debate about whether It also teaches participants how to anticipate successful entrepreneurs are “born or made”. The problems, look for new opportunities, and plan billions of dollars spent by governments, microfinance ways to overcome obstacles. organizations and non-governmental organizations indicate a strong belief that entrepreneurship can HERE’S WHAT WE DID be taught. However, few evaluations of traditional We conducted a randomized controlled trial (RCT) business training programs offered to existing firms with 1,500 microenterprises in Lome, Togo, 53% of have found sustained impacts on business profits, them female entrepreneurs, to compare the impacts particularly for women. of standard business training to personal initiative training. The microenterprises came from a variety SO WHAT TO DO ABOUT IT? of industries (27% manufacturing, 48% commerce, In 2012, a research team from the World Bank set out 25% services). to evaluate a business training program to be offered The 1,500 microentrepreneurs were randomly in Togo as part of a government-led project financed assigned into three groups, each of 500 firms: by the World Bank. The team proposed to test the a control group, a traditional business training International Finance Corporation’s (IFC) Business treatment group and a personal initiative training Edge program against an alternative training. treatment group. The traditional business training The alternative training approach, personal initiative focused on four core topics: accounting and training, was designed by psychologist Dr. Michael financial management, marketing, human resource Frese to develop behavior associated with a management and formalization. The personal proactive, entrepreneurial mindset, rather than initiative training focused on teaching self-starting teaching basic business skills. Personal initiative behavior, innovation, identifying and exploiting training strives to coach small business owners how new opportunities, goal-setting, planning and to be self-starting, future-oriented and persistent. feedback cycles. PSYCHOLOGY-BASED STANDARD BUSINESS PERSONAL INITIATIVE TRAINING vs TRAINING self-starting record keeping future-oriented HR management persistent marketing proactive mindset Personal Initiative Control Group Business Training Training Group no training Program Group self-starting •  goal-setting •  • accounting human •  behavior planning and •  financial •  resource • innovation feedback management management •i dentifying and cycles • marketing • formalization exploring new • overcoming opportunities obstacles Both training courses were held for a total of 36 In addition to higher profits and increased use of hours in three, half-day sessions per week in April standard business practices, business owners 2014, followed by a trainer visiting the businesses who received personal initiative training were more individually once a month over the following 4 months innovative, introduced more new products to their to reinforce the concepts. Four rounds of follow-up businesses, and were more likely to diversify into a surveys were collected between September 2014 new product line, than those in traditional training. and September 2016, enabling the research team After personal initiative training, business owners to track business outcomes for more than 2 years borrowed more and made larger investments. after the training. Personal initiative training was particularly effective HERE’S WHAT WE FOUND for female-owned businesses, for whom traditional Togolese entrepreneurs who went through personal training has often been ineffective. Women who initiative training earned higher profits than those in received personal initiative training saw their the traditional business training or the control group. profits increase by 40%, compared to the control The personal initiative, psychology-based training, group and a 5% impact for traditional business resulted in increased firm profits of 30% compared training. Personal initiative training increased error to the control group, and a statistically insignificant competence (ability to recover from errors) and increase for the traditional business training. The entrepreneurial passion, which led to strengthened traditional business training led microentrepreneurs business success of female entrepreneurs. to increase their use of standard business practices, such as accounting, marketing, and stock control. While both the traditional business training and the However, even without explicitly teaching these personal initiative training cost around $750 per practices, microentrepreneurs who received participant (a cost subsidized by the study), the personal initiative training adopted almost as many personal initiative approach paid for itself within of these practices as those in the traditional business one year given the increase in participants’ monthly training program. profits following the training. Women who received Women who received PERSONAL INITIATIVE TRAINING TRADITIONAL INITIATIVE TRAINING saw their profits increase by saw their profits increase by only 40% 5% CONCLUSION This study’s findings make a strong case for the role of psychology in better influencing how small business training programs are taught in West Africa and beyond. It shows the importance of developing an entrepreneurial mindset in addition to learning the business practices of successful entrepreneurs. Based on these promising results, the personal initiative training is being implemented in programs in Mozambique, Mauritania, Ethiopia, Jamaica, and Mexico. Research underway in these contexts will reveal whether this training can develop more successful entrepreneurs in other settings as well, and will inform if other target groups such as rural communities can benefit from this training. For more information on this study, see the Policy Research Working Paper: https://openknowledge.worldbank.org/handle/10986/28386 FOR MORE INFORMATION, PLEASE CONTACT Markus Goldstein mgoldstein@worldbank.org Rachel Coleman rcoleman1@worldbank.org This work has been funded by the Umbrella Facility for Gender Equality (UFGE), a World Bank Group multidonor trust fund expanding evidence, knowledge and data needed to identify and address key gaps between men and women to deliver 1818 H. St NW better development solutions that boost prosperity and increase opportunity for all. Washington, DC 20433 USA The UFGE has received generous contributions from Australia, Canada, Denmark, Finland, Germany, Iceland, Netherlands, Norway, Spain, Sweden, Switzerland, United Kingdom, and the United States. The first draft of this policy brief was released in January 2018.