Standard models of investment predict that credit-constrained firms should grow rapidly when given additional capital, and that how this capital is provided should not affect decisions to invest in the business or consume the capital. The authors randomly gave cash and in-kind grants to male- and female-owned microenterprises in urban Ghana. Their findings cast doubt on the ability of capital alone to stimulate the growth of female microenterprises. First, while the average treatment effects of the in-kind grants are large and positive for both males and females, the gain in profits is almost zero for women with initial profits below the median, suggesting that capital alone is not enough to grow subsistence enterprises owned by women. Second, for women they strongly reject equality of the cash and in-kind grants; only in-kind grants lead to growth in business profits. The results for men also suggest a lower impact of cash, but differences between cash and in-kind grants are less robust. The difference in the effects of cash and in-kind grants is associated more with a lack of self-control than with external pressure. As a result, the manner in which funding is provided affects microenterprise growth.
Details
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Author
Fafchamps,Marcel, Mckenzie,David J., Quinn,Simon Redmond, Woodruff,Christopher M.
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Document Date
2011/06/01
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Document Type
Policy Research Working Paper
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Report Number
WPS5706
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2011/06/01
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Disclosure Status
Disclosed
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Doc Name
When is capital enough to get female enterprises growing ? evidence from a randomized experiment in Ghana
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Keywords
Finance & Private Sector Development;female labor force participation rates;marginal return to capital;steady state capital stock;external pressure;increase in capital;steady state level;returns to capital;lack of asset;intrahousehold resource allocation;number of siblings;tax on capital;years of schooling;share of asset;equality of treatment;accumulation of capital;capital stock data;access to capital;negative interest rate;expenditure on food;randomized controlled trials;women in business;history of involvement;public good provision;cost of finance;small business owner;access to finance;implicit tax rate;subject to taxation;average treatment effect;gender action;total capital stock;lines of credit;increase in consumption;consumer price index;lend for import;ex post survey;cumulative distribution function;cash grant;treatment group;discount rate;point estimate;female entrepreneur;bargaining power;
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Citation
Fafchamps,Marcel Mckenzie,David J. Quinn,Simon Redmond Woodruff,Christopher M.
When is capital enough to get female enterprises growing evidence from a randomized experiment in Ghana (English). Policy Research working paper ; no. WPS 5706 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/651731468253176197/When-is-capital-enough-to-get-female-enterprises-growing-evidence-from-a-randomized-experiment-in-Ghana