Money or Ideas? A Field Experiment on Constraints to Entrepreneurship in Rural Pakistan
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...
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| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2014/06/19749952/money-or-ideas-field-experiment-constraints-entrepreneurship-rural-pakistan http://hdl.handle.net/10986/19367 |
| Summary: | 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 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. |
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