Network Effects in SME Clusters

Identifying the determinants of entrepreneurship is an important research and policy goal, especially in emerging market economies where lack of capital and supporting infrastructure often imposes stringent constraints on business growth.  However, businesses do not develop in a vacuum.  Evidence from previous studies shows how businesses interact with neighboring businesses, with close associates operating in other areas, and with businesses above and below in the supply chain.  Many businesses are also part of larger networks, some of which make joint sales decisions, share costs, revenues, working capital, and production information.  The objective of this study is to increase knowledge on how business networks form and operate and test whether business and financial knowledge spreads across networks in a competitive market of informal small-scale industrial producers. 

The study is an impact evaluation of a comprehensive technical and business training program for informal small-scale industrial producers such as metal fabricators, shoe makers, caterers, and the like operating in the outskirts of Kampala, Uganda.  Owing to the physical clustering of workshops, the trainings will be delivered at the cluster rather than individual level. Randomization will also be at the cluster level to avoid spillovers to immediate neighbors who might be in the control group while allowing us to capture spillovers across business networks.  This study design enables us to test two competing hypotheses regarding information sharing in networks to see if network members are collaborators that freely share information learned during the training sessions, or if network members are competitors and therefore withhold information from each other to gain a competitive edge.

This project received funding from the SME Initiative Competitive Fund for Entrepreneurship and SME Growth. For additional information on current SME Initiative projects, click here.

Returns to Consulting for SMEs

Policy Issue:

Small businesses are often believed to serve as engines for innovation, employment and social mobility, due to their flexibility in responding to new opportunities and their potential for rapid growth. In developing countries, SMEs make up a particularly large part of the economy, yet data suggests that very few small enterprises in developing countries grow into larger businesses. Human capital constraints on growth might be even more severe than financial constraints if having adequate managerial skills in place is a prerequisite for accessing other resources. However, the market for business skills training is prone to under-investment. Young people and new market entrants are often credit constrained from investing in their own training--even though it would be privately and socially efficient. Second, a perception exists that managerial skills must be learned through experience, rather than taught. These forces lead to an under-investment in business skills training. This pilot study will look at the various constraints hindering SME growth and evaluate whether graduate business students providing consulting services to small business can be an effective conduit for skill transfer.

For additional information on current SME Initiative projects, click here.

Context of the Evaluation:

This study is implemented in metro Manila, an area with a large population of small and medium enterprises (SMEs). Within Makati, the sub-district of Manila where this study takes place, there are over 26,000 businesses registered with the local government. Many of these are SMEs spanning a range of industry sectors, including retail, services, manufacturing, real estate, finance and consulting, trading and wholesale.  

Description of Intervention:

This study evaluates the impact of business skills training offered to owners and managers of SMEs.  Prior to the baseline survey, qualitative interviews were conducted with a sample of businesses meeting basic criteria (at least two years in operation, revenue between one and fifteen million Philippine Pesos, and operating in the retail, services (including restaurants/bars), manufacturing, trading and wholesale sectors).  These interviews included open-ended questions on what the business does, its operations, and its key constraints to growth.  The purpose of the interviews was to gather information on the specifics constraints affecting SMEs, including problems related to cash flow management, suppliers, clients, marketing, access to credit, human resources, and regulations.  The interview also recorded if the business's owner/manager would be interested in receiving free consulting provided by graduate students at the Asian Institute of Management (AIM).

The baseline survey was conducted with those businesses that expressed interest in the consulting and also indicated they were available for the duration of the consulting course.  Implemented in September 2011, the baseline collected data on business operations, human resources, marketing, revenue and costs, and access to and use of financial services, including credit. After the baseline, 25 businesses were randomly selected to receive consulting services while 60 businesses served as a comparison.

Over the course of two months, business owners/manages in the treatment group met regularly with two student consultants from AIM who were assigned to work with them. Meetings occurred approximately every two weeks at the business location and lasted for a few hours. Through these meetings, AIM student-consultants learned about the business and its operations and the business owners/managers discussed the constraints facing their business and the areas needing consulting assistance. The student-consultants then worked with the business owners/managers to develop strategies for addressing their key constraints.

The AIM students were concurrently enrolled in a course at AIM devoted to consulting for SMEs, and course assignments guided their work with the businesses. The students conducted assessments of business performance and submitted recommendations for improvements in the problem areas previously identified with the clients. They then worked with the business owner/manager to implement the recommendations.

Managers and owners of businesses in the treatment group also had the opportunity to attend a workshop provided by the AIM students, which presented specialized topics related to best practices for SMEs and also served as a networking opportunity with other entrepreneurs and small business owners in the area.

Surveys of both the treatment and comparison groups about six and 12 months after the initial training will help to determine if the consulting services helped business to improve operations, increase profits, and expand access to credit.

Results and Policy Lessons:

Results forthcoming.

Greg Fischer, Dean Karlan

Analyzing the Impact of Availability of Finance for Dealers in Second Hand Vehicle Market

Resale markets for repossessed assets are often fragmented, illiquid and poorly functioning in emerging markets. In many markets, SMEs and brokers with limited access to finance dominate the asset resale market which leads to high transactions costs and low liquidity in these markets. Not only can this lead to poor price realization in these asset resale markets. But more importantly it can have economy wide effects on access to finance, since banks use assets as collateral. If the price of this collateral at the point of resale is depressed, banks will not be willing to give large loans against the full value of the collateral. Therefore, this projects aims to test how improvements in access to finance for dealers in local resale markets can improve the pricing, volume and liquidity. We focus on the market for used vehicles in India and work with a local financial institution to provide lines of credit to a randomly chosen subset of dealers to test the impact of liquidity on the secondary asset market.  We will evaluate the bidding behavior and returns to capital for the dealers and the market wide impact on the pricing and turnover of assets and (e.g. bids, volume, and final price). 

For additional information on current SME Initiative projects, click here.


Antoinette Schoar

Identifying Gazelles among Micro and Small Enterprises in Ghana

This project uses a business plan competition to judge the growth potential of micro business owners, and then evaluates if business training for entrepreneurs can improve the managerial capacity of owners with different levels of growth potential. 

Policy Issue:

Entrepreneurship and small businesses are widely promoted as vehicles for economic growth. However, little rigorous research has been done to support this premise or answer the critical question of what factors constrain small and medium enterprises (SMEs). Managerial capital or training may be one factor limiting the efficiency and growth of firms.  This evaluation measures the impact of business training on targeted businesses to determine whether it has the intended multiplier effects for economic welfare by leading to job creation, faster firm growth and stronger supplier or customer networks.

For additional information on current SME Initiative projects, click here.

Context of the Evaluation:

This project targets self-employed small business owners in urban Accra-Tema and Kumasi  with modest levels of formal schooling and substantial experience running businesses.  Rather than focusing on a few large businesses, the project aims to identify a greater number of self-employed entrepreneurs, each with the potential to create a small number of new jobs. These individuals are not likely to be operating cutting-edge businesses but are great in number and provide products and services that are fundamental to the functioning of the local economy.

To implement the business training, the researchers partnered with CDC Consult Limited, an Accra-based consulting company, and the National Board for Small-Scale Industries (NBSSI).

Description of Intervention:

A sample was identified through the publication of a business plan competition by radio, newspaper, and door-to-door marketing in neighborhoods containing large numbers of small businesses (as determined from census data).  To participate in the competition, applicants submitted a form gathering basic information to ensure compliance with eligibility criteria. Eligible entrepreneurs had to be between the ages of 20 and 55 years and be owners of a business that had been in operation for at least one year with two to 20 employees.

Three hundred thirty five applicants were invited to participate in a three day program, offered by CDC Consulting Limited, designed to guide them in writing a basic business plan. The 141 entrepreneurs who completed the training were asked to submit a business plan and then were invited to present it to a panel of four successful entrepreneurs.  The panelists reviewed the business plans and interviewed each entrepreneur, rating each candidate.  Based on the panel ranking, each entrepreneur was assigned a probability of being provided with further, more extensive group training and individualized consulting. Half of the ranked entrepreneurs were chosen to receive more intensive follow-on training. The selection was random with probabilities increasing with the panel ranking.  This second round of training by NBSSI consisted of a six-day group course based on the International Labor Organization‘s (ILO) “Improve Your Business” model. CDC Consult Limited provided individual consulting advice after this course.

A baseline survey was conducted before the initial three-day business plan training course. The baseline gathered information on the history of the business and the owner and enterprise-level data on assets, sales and revenues, as well as current employees, including apprentices and unpaid family workers. The survey also included  measurements of risk aversion, numeracy, logical skills, personality diagnostics, and other measures from the entrepreneurial psychology literature. These measures allow us to identify the characteristics of the entrepreneurs rated most highly by the panel members. After the completion of the group training and individualized consulting, a follow-up survey was conducted to track changes in the business. At least one further follow-up survey was conducted in 2012.

Results and Policy Lessons:

Results forthcoming.


The Impact of Secured Transactions Reform on Access to Capital for Small and Medium Enterprises in Colombia

Policy Issue: 
Small and medium enterprises (SMEs) are thought to be an important source of innovation and employment in developing countries due to their flexibility in responding to new market opportunities and their potential for growth. However, entrepreneurs face a number of barriers to expanding their businesses and employing more workers, including limited access to credit and other financial services. For many firms, especially small and medium enterprises, collateral requirements are often an obstacle for getting access to finance. Banks usually require potential borrowers to provide collateral such as land or real estate, and will not accept collateral in the form of movable assets such as vehicles, machinery, or inventory, which SMEs are more likely to own. This mismatch prevents entrepreneurs from applying for and receiving formal loans. Banks may be unwilling to accept movable assets as collateral if there is no legal framework to govern and enforce this type of lending or if they lack knowledge on how to conduct movable asset-based lending. It is possible that regulatory reform providing such legal framework will encourage banks to adopt movable asset-based lending, helping SMEs access much-needed credit to expand and grow. Additional research is needed to understand how such programs should be designed and to what extent such regulatory reform actually expands access to credit for individual firms.
Context of the Evaluation: 
While Colombia has made a lot of progress in recent years in increasing access to finance for SMEs, entrepreneurs still report that access to finance is among the largest constraints to operating their businesses.1 According to the 2010 World Bank Enterprise Surveys, over 41 percent of firms in Colombia identified access to finance as a major constraint to operating their businesses, which is roughly ten percentage points higher than the average for the Latin America and Caribbean region. At the same time, prior to 2013, Colombia had no legal framework to govern the use of moveable assets as collateral, which restricted the ability of SMEs to take out loans secured with movable collateral. 
The Colombian government, with support from the International Finance Corporation (IFC), an international development organization that focuses exclusively on the private sector, is introducing a new Secured Transactions Reform, which will provide a legal framework for the use and enforcement of movable collateral. The hope is that, by reducing the risk that banks face in accepting movable property as collateral, the reform will allow SMEs to use vehicles, industrial equipment, inventory, and other movable assets as collateral for their loans.
Details of the Intervention: 
In order to understand whether the Secured Transactions Reform has an impact on firm-level outcomes such as sales and employment, researchers will assign a randomly selected group of firms to receive extra encouragement to apply for loans under the new regulation. Out of a sample of 1000 SMEs across three Colombian metropolitan areas (Bogotá, Cali, and Medellín), 500 firms will be randomly selected to receive additional information and encouragement to apply for a loan secured with movable collateral. 
The remaining 500 firms will serve as the comparison group. 
Results and Policy Lessons: 
Project ongoing. Results forthcoming. 

1Enterprise Surveys, “Colombia (2010),” The World Bank.

The Impact of Computer-generated Credit Scores on Lending in Colombia

Small and medium enterprises are seen as promising engines of growth in developing countries but often fail to live up to their potential because of barriers to growth such as limited access to credit. Researchers used a randomized evaluation to measure the impact of introducing computer-generated credit scores on lending to micro and small enterprises in Colombia. The program significantly increased productivity in the loan approval process and improved allocation of credit without affecting average loan amounts and default rates.    

For additional information on current SME Initiative projects, click here.

Policy Issues:

Small and medium enterprises (SMEs) are thought to be an important source of innovation and employment in developing countries due to their flexibility in responding to new market opportunities and their potential for growth. However, entrepreneurs face a number of barriers to expanding their businesses and employing more workers, including constrained access to credit.

Whereas assessing the credit-worthiness of prospective borrowers has become relatively cheap and easy in developed countries through the use of credit scoring, in developing countries this process can be cumbersome in the absence of reliable information about the  credit or financial history of potential bank clients. The high costs associated with assessing the riskiness of loan applicants can outweigh the financial returns of lending, making banks reluctant or unable to make loans to SMEs. Credit scoring has been used successfully in the United States and other developed countries to reduce the cost of identifying creditworthy applicants, but there is little evidence on whether computer-based credit scoring might work in developing country contexts.


Researchers partnered with BancaMia, a for-profit bank that lends to small and medium businesses in Colombia. Prior to this study, BancaMia made all of its lending decisions based on information collected by loan officers. Applications incorporating the collected information were reviewed by a credit committee, who could approve or reject them. In difficult cases, the committee could also refer the application to upper-level managers or postpone their decision until more information was collected. The loan approval process under this system was under the discretion of the committee and was very expensive due to the high number of referrals and rounds of information collection. In an effort to improve its loan approval process, BancaMia developed its own credit scoring software, which produces a credit score based on verifiable client information.

Details of the Intervention:

Researchers, in collaboration with BancaMia, used a randomized evaluation to measure the impact of the credit scoring software on the loan approval process and loan outcomes.  

Out of  1421 loan applications that were scored through the new software, 1086 scores were randomly chosen to be revealed to the committee.  Scores were revealed either at the beginning of the application review process or after the committee had finished an initial review and made an interim decision about whether or not to offer a loan. Although the committee in the latter case did not know the applicant’s exact score, they did know that a score could become available once they reached a decision.

Researchers collected information about various aspects of the loan approval process (e.g., the average time spent evaluating an application, the number of approvals and rejections issued etc.) as well as loan performance and default rates.


Impact on Credit Committee Effort and Output:

Revealing the computer-generated credit scores at the beginning of the application review process  increased both the probability of the committee making a decision and the amount of effort put into the review. Seeing the score in advance raised the probability of the committee reaching a decision by 4.6 percentage points from a base of 89 percent. This change was driven by the reduction in the number of applications referred to bank managers and  the number of cases for which the commitee requested more information to be collected for a second round evaluation. In addition, the committee spent more time evaluating loan applications, especially the difficult cases (e.g., applicants that requested larger loans).

The committee also became more productive when it knew that a score would become available after the initial evaluation. The anticipation of seeing a score increased the probability of the committee making a decision to approve or reject an application by 3.9 percentage points. This improvement in committee productivity even in the absence of a credit score suggests that the committee might already have had the necessary information to make decisions on difficult applications, but lacked the incentives to use this information efficiently.

Impact on Loan Allocation and Outcomes:

Although providing computer-generated scores to the committee did not affect loan outcomes such as the average size of loans issued or default rates among borrowers, it did improve credit allocation. Computer-generated credit scores reduced uncertainty about borrowers’ creditworthiness, allowing banks to extend larger loans to less risky borrowers and smaller loans to riskier borrowers. As a result, there was no change in average loan size issued, but the bank was better able to match its lending to borrower characteristics.

Considered together, these results show that the credit scoring program had significant impact on the bank’s productivity. Specifically, summarizing the credit worthiness of prospective borrowers into a single, easy to understand number increased the quantity of difficult cases that the credit committee resolved. The score also nudged committee members to put in more effort on difficult applications. This could potentially reduce the workload of bank managers and reduce the cost of administering loans for the bank. The increase in productivity without providing new information to the credit committee also implies that banks may need to better incentivize their employees who hold useful information.

Related Paper Citations:

Paravisini, Daniel, and Antoinette Schoar. "The Incentive Effect of IT: Randomized Evidence from Credit Committees." NBER Working Paper No. 19303, August 2013.

Supply Chain Financing for Dairy Farmers

Policy Issue:

Farming entails long cycles of production which require up-front investment in animals, equipment, seeds, fertilizers, and other inputs. However, small farmers may have problems securing access to credit if they are located in remote areas that are not served by traditional financial institutions. Many small farmers manage their businesses informally and frequently do not have records or financial information that banks require for lending. Some microfinance institutions have tried to expand their usual urban activities to rural clients, but the costs of doing business in rural areas are still high and limit their scope. However, farmers often have stable relationships with agriculture processing companies and traders who purchase their crops, and these relationships may provide an opportunity to facilitate loan distribution and repayment.

For additional information on current SME Initiative projects, click here.

Context of the Evaluation:

In Colombia, less than 8% of rural households and enterprises are thought to have access to formal loans[1]. Nevertheless, there are about 400,000 families engaged in small and medium agribusiness for the production of milk in rural Colombia.[2] Milk production requires daily contact between the producer and the buyer, with payment occurring frequently. Buyers tend to attract the best dairy producers by providing access to inputs for production, or other services, or rewarding quality with higher prices.

Description of Intervention:

Bancamía, a bank specializing in microfinance, partnered with Alquería, a Colombian dairy company, to offer an individual loan product to small dairy farmers. Four hundred thirty five small dairy farmers who sell milk to Alquería via three intermediaries were randomly assigned to a treatment group, receiving a loan product offering, or a comparison group, receiving no product offering.

Bancamía offered the farmers in the treatment group a micro-loan with  a unique repayment process. Each month when the loan installments were due, farmers did not have to travel to the bank office to make the payments. Instead, the Alquería dairy deducted the value of the monthly installment from the farmer’s milk transfer payment and paid the bank directly. This scheme reduced risk for the bank as well as transportation, planning and transaction costs for the farmers. Loans ranged from about one to five million COP (about 560-2,800 USD) and were granted over a one to three year period.

To promote the credit program, meetings were held at the offices of three of the Alquería buying intermediaries to introduce farmers to the program, the benefits of the product, the rules and obligations, and the loan application and repayment process.  At the end of the meetings, milk farmers in the treatment group were provided with bank contact information and the opportunity to file a credit application.  Both those who participated in the meetings and selected participants who could not attend the promotional meeting received a phone call reminder about the program.  Before, during, and after the program, surveys were administered to collect socioeconomic information, household wellbeing, and loan data.

Results and Policy Lessons:

Low levels of loan product take-up led to a discontinuation of the evaluation.  Two main issues affected the implementation.  Firstly, two Alquería intermediaries offered their own loan products, very similar to the product offered by Bancamía, which lowered the demand. Secondly, the beginning of the rainy season was unexpectedly devastating that year, causing major flooding, damage to farmland, and death of livestock.  While the evaluation was discontinued, Bancamía, Alquería, and the intermediaries have continued to service the 33 clients who applied and received loans.

[1]Colombia Rural Finance: Access Issues, Challenges and Opportunities. Rep. no. 27269-CO. World Bank, Nov. 2003. Web. 16 Mar. 2010

[2]Rivera, José Félix Lafaurie, “TLC…la batalla no ha terminado.” Carta Fedegan N. 117.

Evaluation of Female Supervisor Training Programs in the Bangladesh Apparel Sector

Increasing evidence suggests that poverty reduction in developing countries is best pursued by creating stable employment opportunities in medium and large firms. Where do employment opportunities in these firms come from? The macro-economic literature argues that, ultimately, employment generation comes from increases in productivity at the aggregate level. The issue of productivity has therefore gained centre-stage in micro studies of industrial development.

This project—one of the first randomized control trials of a vocational training program for production workers in medium large factories—is designed to analyze whether training programs have the potential to address the “skills gap” that is an impediment to increased productivity in many developing economies. The context of the proposed study is the ready-made garment (RMG) sector in Bangladesh - an industry that employs about three millions low skilled workers, mostly women, and that has historically played a crucial role in the early phases of the industrialization process.  This project evaluates the GIZ Female Supervisor Training Program, which selects and trains female workers to become line supervisors and middle managers.  The main hypothesis to be tested is whether providing skills to workers and supervisors improves productivity and other outcomes (e.g. quality defects, lead time and waste) at the production-line level.  Research questions include: 1) What is the impact of training and skills on the income, livelihoods and working conditions of production floor workers, particularly young women? 2) What is the impact of training and skills on productivity, organizational, labor and managerial practices as well as labor relations and conditions at both the factor and production line level? and 3) What are the mechanisms through which training and skills affect productivity?  Does promoting a better gender balance across layers in the hierarchy increase coordination and communication on the production line?

Mobile Application as a Tool for Improving Record Keeping and Accounting Practices of Micro Retailers

Many subsistence entrepreneurs in developing countries do not maintain adequate business records which may limit their ability to streamline business operations and increase profits. This exploratory study was designed to explore take up and role of a new mobile application in helping small shopkeepers in Colombia to keep records, create business reports and manage other business tasks. Results show that while the application wasn’t widely adopted by the study participants, it was particularly useful for some of the shopkeepers who had good record keeping practices before they were introduced to the application.

Note: This research project is a pilot study designed to provide insights for a potential scale up to a full randomized controlled trial.

For additional information on current SME Initiative projects, click here.

Policy Issues:

Many entrepreneurs in developing countries who rely on their small businesses to meet basic consumption needs do not maintain records of business expenses or sales.  Without a system for managing finances, these small businesses may miss opportunities to increase profits and trim expenses. Providing tools to these micro entrepreneurs to help them manage their finances may be a way to improve their business outcomes and household consumption levels.


Colombia has an estimated 400,000 micro and small stores or "tiendas”, which account for 52% of food and retail sales [[1],[2]]. While tienda entrepreneurs sell hundreds of different products and manage relationships with wholesalers, most of them continue to use minimal business administration tools, for example, writing down sales and purchases in notebooks, or don’t use any record keeping at all.

To test if a more formal and engaging record keeping system could improve shopkeepers’ business records management, IPA partnered with Frogtek, a firm that builds business tools for entrepreneurs in emerging markets. Frogtek developed Tiendatek, a smart phone application that allows shopkeepers systematize their business by managing their accounting, inventories, sales, payments to suppliers, expenses and earnings. All data generated by the shopkeeper is uploaded and stored on a mobile phone and a Frogtek web server. The Tiendatek application creates reports on sales, purchases, credit, inventory, and break-even points based on the data uploaded by a shopkeeper.

Tiendatek relies on mobile phone technology, which is widespread and popular in Colombia. The country has among the highest rates of participation in the communication and technology markets, with 92.3 cell phone subscriptions per 100 people and 45.5% of the population using internet [[3]]. Thus, the application is easily accessible for micro and small retailers.

Details of the Intervention:

This exploratory study was designed with the goal of understanding take up of Tiendatek application and characteristics of shopkeepers who end up adopting the application. In the case of sufficient take up the study was also designed to explore whether and how the application helped small shopkeepers to better manage their businesses. The study targeted shopkeepers with sales between 1,000 and 2,000 USD a month. Frogtek staff interviewed shopkeepers, assessed their interest, delivered a mobile phone with Tiendatek application installed and provided training in one or two visits. Shopkeepers also received technical assistance from Frogtek staff for 6 months after delivery of the phone. In total, 58 shopkeepers received the phone, training and technical assistance.

Fifty-one shopkeepers were surveyed approximately ten to twenty days after receiving a new phone. A follow up survey was completed eight to ten months after the initial phone delivery with 47 shopkeepers. In addition, all data generated by shopkeepers and uploaded to a Frogtek web server was used as supplemental data for the study.


Tiendatek received positive feedback from shopkeepers who participated in the study, with 96 percent of them indicating that they would recommend it to their colleagues. However, most shopkeepers did not use the application fully; they did not register all business transactions through the application which in turn limited their ability to take advantage of features such as profits and inventory reports. Moreover, of the 40 shopkeepers who answered the question in the follow up survey, only 10 were still using it 10 months after receiving it.

While the application wasn’t widely adopted by the study participants, it was more popular with those shopkeepers who were more diligent in their record keeping and accounting practices initially. Out of 32 shopkeepers who reported having some system of recordkeeping in the baseline survey, four adopted Tiendatek, while among the 15 who did not have a formal recordkeeping system initially, six begun using notebooks and none started using Tiendatek. Moreover, shopkeepers who had good record keeping and business practices before they received the phone, for example, keeping written records and making an inventory of products, were more likely to use Tiendatek more frequently and for a longer period of time. 

[1]Diaz, Alejandro, Jorge Lacayo, and Luis Salcedo. 2007. "Selling to ‘mom-and-pop’ stores in emerging markets" The McKinsey Quarterly

[2]De Jacobs, Alicia. “Colombia Retail Food Sector” USDA Foreign Agricultural Services Global Agricultural Information Network Report, October 2010.


Making the Jump to Employer: What does it take?

A large fraction of the labor force in many developing countries is self-employed, but few of these self-employed individuals ever make the jump to hiring paid employees. A cross-cutting intervention will evaluate the impact of three policies aimed at helping small firm owners to make that jump.

The first is business training. The second is a wage subsidy for the first six months of hiring a new worker. The third is a matched savings program to encourage small business owners to accumulate sufficient capital to make the necessary investments needed to make an additional worker profitable.

We randomly provide these three programs to microenterprises, also interacting the treatments so that we can see, for example, whether business training has more impact if also coupled with savings, or whether wage subsidies work better for the self-employed who have receiving training on how to grow their businesses.

Returns to Consulting for Women Entrepreneurs

This study of the impact of entrepreneurship training and mentoring in Uganda evaluates a program which aims to help women entrepreneurs develop the skills they need to run thriving businesses. In addition to testing the overall impact of the program on participating entrepreneurs and the businesses with whom they compete or collaborate, the study will demonstrate the relative cost-effectiveness of intensive, personalized training versus a less intensive, standardized approach. The program will be advertised to female business owners in urban Central Uganda. As the training is expected to be oversubscribed, entrepreneurs who meet basic eligibility criteria will be randomly assigned to receive high-intensity personalized training, low-intensity standardized training, or no training (the comparison group). The randomized design allows systematic differences in outcomes to be attributed to differences between the treatment and control groups, and thus allow researchers to learn more about the impact of business skills training on profits, business size, and other outcomes for female entrepreneurs.

For additional information on current SME Initiative projects, click here.

Policy Issue:

Small and medium enterprises (SMEs) are often viewed as potential engines for innovation, employment, and social mobility, and promoted as vehicles for economic growth.  In many developing countries, SMEs make up a particularly large part of the economy, yet data suggest that very few grow into larger businesses. If SMEs have such growth potential, what prevents them from expanding?

Human capital constraints may be key, especially if having adequate managerial skills in place is a prerequisite for accessing other resources, such as financial services. Many “business development services” and “entrepreneurship training” programs target SMEs in developing countries, but there is almost no systematic evidence on the effectiveness of such programs.  This project evaluates a training and mentoring program in Uganda aimed at helping female entrepreneurs develop the skills they need to run thriving businesses. The objective of the evaluation is to measure the impact of an increase in “managerial human capital” on business outcomes for entrepreneurs who receive training, as well as the spillover impact of such an intervention on competing and collaborating businesses. It also compares the relative cost-effectiveness of skill transfer through a more personalized, time- and resource-intensive training approach, versus a standardized, less intensive one.

Context of the Intervention:

TechnoServe, an international non-profit business development organization, implements a business training program called Women Mean Business (WMB) in four cities in Central Uganda—Kampala, Entebbe, Jinja and Mukono.   Since 2008, almost 600 women have received business skills training through the WMB program.  A market survey of SMEs in these four cities, conducted by IPA, revealed that approximately 54% of all businesses interviewed were owned or managed by women.  However, owners of small businesses – and especially female entrepreneurs – may lack management skills and information about how to access financial services and other resources, limiting their ability to improve and grow their businesses.  For example, although women own nearly 40% of businesses with registered premises, they obtain only 9% of all credit disbursed.[1]The WMB program aims to provide female entrepreneurs with tools and training to better manage and grow their businesses. 

Details of the Intervention:

Eligible entrepreneurs will be randomly assigned to one of three groups: In Depth training, Light Touch training, or a comparison group.  Program activities for both tracks will take place over the course of a year, and will be implemented by TechnoServe staff or outside consultants and mentors trained and supervised by TechnoServe.

In the first year of the program, Light Touch track participants attend classroom training sessions on topics such as financial management, sales/marketing, customer relations and human resource management.  Each topic will be covered in a two-day training session, with one session each month.  Participants will also be placed in sector working groups (e.g. manufacturing, retail, services), which will meet for additional, targeted training lessons and field activities.  In the second year of the program, refresher training sessions will be held to provide more clarity on the topics and address any specific issues faced by the participating businesses.  Finally, Light Touch participants will receive individual visits from a TechnoServe counselor to discuss any business-specific challenges they face.

Women in the In Depth track will receive all of the services offered to the Light Touch group, and in addition, will be matched with student coaches selected from local business schools.  These coaches will work with the women for eight weeks in the first year of the program to develop a five year business plan.  In the second year, the women will be matched one-on-one with mentors, who they will work with over three months to implement the business plan and adopt the lessons from the various training activities. 

Before the start of the WMB program, a baseline survey will gather information on each business's operations, products and sales, employment, and finances, as well as background information on the owner/manager.  Eight to twelve rolling follow-ups surveys will be conducted over the course of two years to gather data on business performance during and after the one-year WMB training program.  A final endline survey will be conducted two years after the baseline survey and one year after the WMB program ends. 

Results and Policy Lessons:

Results forthcoming.

[1] Ellis, Amanda, Claire Manuel, and C. Mark Blackden, “ Gender and Economic Growth in Uganda: Unleashing the Power of Women,” Directions in Development 2006. 

The Impact of Enhanced Business Training for High-Potential Entrepreneurs in Colombia

Small and medium enterprises (SMEs) are thought to be important drivers of growth in developing economies, but entrepreneurs in these countries face many barriers, including access to business training, finance, and business networks. In Bogotá, Colombia, Fundación Bavaria’s “Destapa Futuro” (Open the Future) program identifies promising enterprises and provides them with a suite of financial, technical, business and training resources. In this round of the program,  Fundacion Bavaria and its partners competitively selected 1,000 entrepreneurs for a month-long virtual training which culminated in a business plan competition. Based on their business plans, 454 entrepreneurs were chosen to participate in an evaluation. Half were randomly selected to receive additional classroom training, and will be compared to those that didn’t.  Researchers will measure the impact of the program on SME profits, sales, and business creation rates.
For additional information on current SME Initiative projects, click here.
Policy Issue:
Small and medium enterprises (SMEs) are thought to be an important source of innovation and employment in developing countries, due to their flexibility in responding to new market opportunities and their potential for growth. However, entrepreneurs face a number of barriers to expanding their businesses and employing more workers, including things like constrained access to credit, lack of management skills, and unfavorable government regulation. Business training, capital, and mentorship are possible tools that could help SMEs overcome these barriers, but rigorous evaluations of business training programs have found mixed results. Additional research is needed to understand how training programs should be designed and delivered, and how they might work in combination with additional inputs such as seed funding, in-kind donations, or mentorship.
Context of the Evaluation:
Fundación Bavaria works to foster entrepreneurship in Colombia through an intensive, year-long program called “Destapa Futuro” (Open the Future). The program uses a competitive process to identify entrepreneurs whose businesses have the potential for high growth and provides them with training, capital, technical advice, and the opportunity to network with investors. Since 2005, Bavaria has spent close to $10 million on this program. A prior project evaluated the 5th round of Destapa Futuro in 2010-2012.
During the sixth round of Destapa Futuro in 2012-2013, Bavaria introduced several changes that were intended to make the program more financially sustainable while providing better support to entrepreneurs. First, they began partnering with Ventures Colombia, an NGO that promotes entrepreneurship in Colombia. Second, a new training curriculum was introduced, which taught entrepreneurs to think holistically about their business models and prepared them to make presentations to potential investors. Third, Bavaria switched from granting cash prizes to granting loans through a large Colombian bank for a selected group of qualified entrepreneurs and smaller cash prizes for the rest.
Details of the Intervention:
Entrepreneurs were invited to submit online applications to take part in the Destapa Futuro program. Out of 5,000 applications, a group of approximately 1,000 entrepreneurs who passed Bavaria’s initial selection process participated in a virtual training course based on the Business Model Canvas approach, which is designed to help entrepreneurs visualize and document various aspects of their business operations. They also received four virtual business training sessions on strategy, marketing, financial, and legal strategies. At the end of the month-long course, participants were asked to submit their business plans to the Ventures team for evaluation. All the business models submitted by the end of the training were evaluated by Ventures staff, and the top 73 entrepreneurs from this pool were selected to receive an in-person business training program. Because their participation in the training program was not randomly assigned, they are not part of the study sample.
Of the remaining business plan submissions, 454 were selected to participate in the evaluation. Of these 454 entrepreneurs, half were randomly allocated to a treatment group, which received in-class training and mentorship. The in-class training lasted two to three days and covered the same topics as the virtual training, but in more depth. The remaining 227 entrepreneurs served as the comparison group and received no new training or mentorship.
Researchers will measure the impact of the training, mentoring, and networking program on SME profits, sales, and business creation rates.
Results and Policy Lessons:
Results forthcoming.
Antoinette Schoar

The Impact of Business Training and Capital for High Potential Entrepreneurs in Colombia

Small and medium enterprises (SMEs) are thought to be important drivers of growth in developing economies, but entrepreneurs in these countries face many barriers, including poor access to training, finance, and business networks. In Colombia, Fundación Bavaria’s “Destapa Futuro” (Open the Future) program identifies promising enterprises and provides them with a suite of financial, technical, business, and training resources. Researchers found that the trainings did not affect key business outcomes, such as sales and profits, but helped entrepreneurs to expand their business networks. 
For additional information on current SME Initiative projects, click here.
Policy Issue:
Small and medium enterprises (SMEs) are thought to be important sources of innovation and employment in developing countries, due to their flexibility in responding to new market opportunities and their potential for growth. However, entrepreneurs face a number of barriers to expanding their businesses and employing more workers, including constrained access to credit, lack of management skills, and unfavorable government regulation. Business training, capital, and mentorship are possible tools that could help SMEs overcome these barriers, but existing evaluations of business training programs and capital injections for enterpreneurs have found mixed results. Additional research is needed to understand how training programs should be designed and delivered in order to best help entrepreneurs develop their operations and foster economic growth.
Context of Evaluation:
Fundación Bavaria, a foundation started by one of the largest beverage companies in Colombia, works to foster entrepreneurship in Colombia through an intensive, year-long program called “Destapa Futuro” (Open the Future). The program uses a competitive process to identify entrepreneurs with promising business plans or small start-ups and provides them with business training, capital, technical advice, and the opportunity to network with investors. Since 2005, Bavaria has spent close to $10 million on the program, trained thousands of entrepreneurs, and financially assisted more than 200 businesses. 
Destapa Futuro targets relatively experienced and educated entrepreneurs. The average participant was 36 years old, had 16 years of education, and had four years of experience as an entrepreneur. Seventy-three percent were male. During the fifth round of Destapa Futuro in 2010-2011, these participants received business training from two organziations that support entrepreneurs, the Centro de Formación Empresarial (CFE) and Endeavor Colombia. 
Description of Intervention:
Researchers evaluated Destapa Futuro’s impact on business outcomes, the difference between the two organization’s different training strategies, and the relative impact of receiving prizes in cash or in kind. In order to participate in the program, entrepreneurs completed an online application, which included questions on business characteristics, leadership potential, experience in business administration, and potential social impact. From the database of 8400 applications 475 candidates, half of them with business plans and the other half with existing start-ups, were selected and ranked. 
This pool of 475 entrepreneurs was divided into three groups:
  • The top 25 entrepreneurs all received the Endeavor training. Because their participation in the training program was not randomly assigned, they were not part of the study sample.
  • The following 100 entrepreneurs were randomly assigned to receive training from either Endeavor or CFE.
  • The remaining 350 entrepreneurs were randomly assigned to either the CFE training group or the comparison group, which did not receive any training.
Both the Endeavor and CFE trainings included modules on financial management, marketing and business plan development. Endeavor offered an in-person training,delivered in two two-day sessions. All classes had a maximum of 20 entrepreneurs per trainer. In addition to lectures, each entrepreneur participated in several one-on-one discussions with program coordinators, trainers and mentors. CFE used a combination of online learning and in-person classes.  In the online component, which consisted of four modules over one month, participants were assigned to groups of 18-21 students. They completed online modules with homework assignments, participated in online forums, and collaborated via email and phone. The entrepreneurs who completed homework and participated in forums were eligible for the in-classroom training, which consisted of four days of classes with the same tutor assigned during the online training. 
After the CFE and Endeavor trainings were completed, the 100 entrepreneurs with the best business plans and course performance were selected to receive an additional coaching session in preparation for the business plan presentation that would determine the prize winners. The coaching session provided contestants with feedback on content and style of their presentations. After the presentations, the best 60 entrepreneurs were awarded a prize to fund their bussines.
In order to test how having the flexibility to choose how to spend the prize money affected business outcomes, half of the winners were randomly assigned to receive cash, and the other half received an in-kind prize. Cash prizes ranged from about 5,600 USD to 56,000 USD (10-100 million COP). Fundacion Bavaria determined the nature of the in-kind prizes based on the entrepreneur’s requests and available resources, and they included business equipment, marketing and advertising materials and other business investments.  Forty winners were also randomly selected to receive mentorships with Bavaria executives, who listened to business plan prsentations, gave advice, and suggested potential contacts.
Results and Policy Lessons:
Impact on business outcomes: Enterpreneurs who participated in the CFE training did not have higher sales, costs, profits or number of employees than the entrepeneurs who did not receive any training.  Entrepreneurs in the CFE training were just as likely to start a company as entrepereneurs who did not receive training. Similarly,  entrepreneurs who participated in the Endeavor training did not have significantly different business outcomes compared to those who participated in the CFE training.
One of the goals of the Destapa Futuro program was to help entrepreneurs expand their business networks by meeting fellow entrepreneurs, trainers and mentors. Entrepreneurs in the CFE training who did not have existing start-ups were more likely to secure a contact with a partner, ally or investor than entrepreneurs who did not participate in the training. The Endeavor training was more beneficial for network expansion for enterpreneurs with existing start-ups, while the CFE training was more beneficial for enterpreneurs with business plans only.
In-kind versus cash prizes: Compared to recipients of cash, winners of in-kind prizes did not have significantly different sales, profits or costs. The type of prize also did not influence investment choices of entrepreneurs, with the majority investing their winnings into machinery and equipment. Since the type of prize did not affect outcomes of entrepreneurs, and it was logistically easier and faster to disburse cash prizes, in this context cash may be a preferred option.
In the sixth round of Destapa Futuro, Bavaria Foundation modified the program to be more financially sustainable while providing more personalized support to entrepreneurs.

Powering Small Retailers: the Adoption of Solar Energy under Different Pricing Schemes in Kenya

The majority of people living in Sub-Saharan Africa do not have access to electricity. Traditional power companies often find it too costly to bring electricity to rural and suburban areas, but in recent years, the cost of alternative energy sources like solar power has fallen dramatically. Providing small businesses with access to reliable electricity through off-grid solar power systems could potentially help small retailers earn more by keeping their businesses open longer and introducing new services. This randomized evaluation tests how price and payment method affect the adoption of off-grid solar power among small retailers near Nairobi and if access to electricity can improve their businesses’ performance.

Policy Issues: 
Nearly 70 percent of people living in Sub-Saharan Africa lack access to electricity. Most traditional power companies find it too costly to extend the electric grid to many rural and suburban areas. Without access to power, households and small businesses typically use kerosene-powered lanterns or candles to provide light at night. Access to electricity could potentially help small retail businesses earn more revenue by extending their hours of operation or offering other services to customers, such as mobile phone charging facilities. 
Many have proposed solar power as a way to bring safe and reliable electricity to small businesses and households that cannot access the electric grid. Yet for small retail businesses the cost of off-grid solar power systems may still be prohibitive. How do price and different payment methods affect the adoption and use of off-grid solar power systems among small retailers and how does access to electricity affect their business performance? 
The small businesses participating in this study typically sell food, drink, clothing, or other household goods. Access to electricity could potentially allow them to increase their evening operating hours, offer mobile phone charging services in their stores, and save on their own mobile phone charging costs. 
Angaza Design is a company that markets off-grid solar power systems to consumers and businesses in East Africa. Their main product is an LED light unit with integrated mobile phone charging and a detachable 3-watt solar panel to charge the unit’s battery. While the total cost of this solar power system is often too high for small retailers to purchase all at once, Angaza Design allows people to purchase the solar unit for a small down payment and then use a mobile money platform to pay for energy output in affordable increments by “topping up” device credit, just like they currently purchase mobile phone airtime. The device can be disconnected if payments are not made. Regular payments are applied towards paying off the full cost of the device, after which it is automatically “unlocked” and can be used without purchasing additional device credits.
Description of Intervention: 
Researchers are conducting a randomized evaluation in partnership with Angaza Design and SunnyMoney to estimate the impact of different pricing schemes, payment schedules, and enforcement methods on the adoption of off-grid solar power and the impact of access to electricity on small retail businesses’ revenue and profits. From a sample of 1,849 small retail businesses operating in the outskirts of Nairobi, researchers randomly assigned some businesses to receive one of four different offers to purchase the Angaza Design solar power system and some businesses to serve as the comparison group. Those offered the solar power system received marketing visits in which the salesperson read a script describing the features of the solar power system, the payment process, and penalties for late payments. The salesperson then gave the customer a voucher needed to purchase the solar power system from a sales agent, under one of four different payment schemes: 
  • Offer 1 provides the customer with a pay-as-you-go solar power device at 15 Kenyan shillings (KSH) per hour (about US$0.17) of electricity used. Customers are sent one text message per week to remind them to purchase more solar power time. 
  • Offer 2 instead allows the customer to make weekly payments of 130 KSH (about US$1.70) for unlimited use of the solar power system. The customers are sent a reminder to pay the day before their next payment is due. If a payment is missed, the solar power system automatically shuts off until the payment and a 50 KSH (US$0.56) penalty are paid.  
  • Offer 3 is identical to Offer 2 except that while customers are told about the 50 KSH penalties for non-payment during the initial marketing visit, after they receive the solar power system they are told it will not be applied. If customers fail to make a payment, the solar power system will not work until the retailer pays the weekly installment, but no penalty is charged. 
  • Offer 4 is identical to Offer 2 except that after customers receive the solar power system, they are told that neither the late payment penalty nor the shutoff will be applied if they fail to pay their weekly bill. Under this condition, there are no penalties for failing to pay and the device continues to work.
Results forthcoming. 

The Impact of Credit-Scoring on Small and Medium Enterprise (SME) Lending and Performance in the Philippines

How does access to credit affect the growth of small and medium enterprises – both firms receiving loans as well as their competitors, suppliers and customers? Limited access to credit is commonly identified as a key constraint to SME growth, but little evidence exists of the direct and indirect effects of loans on small firms in a given market. Researchers are working with a large bank in the Philippines, using random assignment to offer loans to SME applicants who fall just below the threshold to be automatically approved for a loan. The researchers will compare the firms that received the loans to a similar group that did not. Comparing the two groups will allow for a better understanding of the impact of loans on firm performance and growth as well as any additional effects on firms in the same market or in the loan recipient’s supply chain.  
For additional information on current SME Initiative projects, click here.
Policy Issue:
Small businesses are often thought to be an important source of employment, innovation, and economic growth. In many developing countries, small and medium enterprises (SMEs) make up a large share of registered businesses, but a much smaller share of GDP. Data from several countries suggest that few SMEs grow to become larger businesses. One reason could be that unlike larger businesses, SMEs have limited access to credit, preventing them from making larger investments to improve their operations, upgrade to new technologies, or expand.
Most SMEs’ financing needs exceed the small loans that microfinance institutions provide. Yet larger commercial banks often find it too expensive to lend to SMEs because the cost of assessing whether an SME is creditworthy is high relative to the return banks could earn by lending to them. Many banks also perceive SMEs as being too risky and more likely to default on loans. Credit scoring has been used extensively in developed countries to reduce the cost and time required to process loan applications and to assess the riskiness of loan applicants in order to make small business and consumer lending profitable for banks. Can a credit-scoring system increase lending to SMEs in emerging markets, and does access to credit improve these businesses’ profitability? How does increased access to credit affect other businesses in the same market, namely the competitors, suppliers, and customers of businesses receiving loans?
Context of the Evaluation:
In the Philippines, the vast majority of registered enterprises are small or medium sized. Nationwide, there are over 800,000 micro, small, or medium enterprises. These businesses span a range of industry sectors, including wholesale and retail trade, manufacturing, and services. Promoting SME growth is a central focus of national policy and all banks are mandated to set aside at least 8 percent of their total loan portfolios for SMEs. The Development Bank of the Philippines (DBP) is a development banking institution mandated to provide medium and long term loans to SMEs. In 2013, DBP began to roll out its new Retail Lending Program for Micro and Small Enterprises in 45 bank branches across the country. Under this program, DBP will make lending decisions using credit scoring software, which will determine loan approvals based on verifiable client information and an objective credit score, replacing the current approval process which relies on loan officers’ perceptions about applicants’ creditworthiness.
Details of the Intervention:
Researchers are conducting a randomized evaluation in partnership with the Development Bank of the Philippines (DBP) to test how access to credit affects both borrowing businesses’ performance and that of their competitors and suppliers.
Each of the 45 DBP branches will advertise the new Retail Lending Program to SMEs in their area and encourage them to apply. The branches will be assigned to either target SMEs in certain randomly chosen industries for loans (e.g. bakeries or water purification plants) or to not target any industries in particular. After SMEs submit an application, the credit scoring software will assign each applicant a score. Applicants whose scores fall in a pre-defined range just below the minimum score that automatically qualifies someone for a loan will be randomly assigned to either receive a loan or serve as part of the comparison group. In branches that are randomly assigned to target certain industries, marginally qualified applicants in the targeted industries will have a 90 percent chance of receiving a loan. This randomized “bubble” will include approximately 250 of these marginally qualified applicants.
DBP’s credit committee will then review all loans approved by the credit scoring system prior to final approval, reserving the right to deny loans based on information not included in the credit scoring model, such as criminal history. Loan officers will separately record whether they would have normally approved the loan without the credit scoring system, allowing researchers to compare credit scoring to the current, more subjective lending approach.
Businesses in the treatment group will receive loans between PHP 300,000–10,000,000 (US$5,590–186,200). The terms of the loans will range from three months to five years. A baseline survey will be conducted with all sample firms prior to loan disbursement. One year after the loans are disbursed researchers will conduct a follow-up survey to measure the SMEs’ investment and profits. Administrative data from DBP will be used to measure loan repayment and default.
Researchers will also survey the SMEs’ competitors and suppliers to examine whether receiving a loan had an impact on those firms. Increased access to credit may make SMEs more efficient and profitable, potentially taking away business from their competitors. On the other hand, if increased access to credit leads some businesses to develop better methods of production that their competitors can copy, access to credit could potentially indirectly benefit their competitors. Similarly, access to credit may have spillovers on a loan recipient’s suppliers as a result of business expansion or adoption of new technologies. This study will examine whether increased access to credit indirectly benefits or harms borrowers’ competitors and suppliers.
Results and Policy Lessons:
Project ongoing.

Credit, Change, and Lost Sales: The Surprising Impact of Small Change on a Firm’s Profitability in Kenya

Highlighting the importance of carrying correct change helped firms to change their behavior and increase profits.

Policy Issue:

Small businesses in developing countries are thought to face numerous challenges in their efforts to expand and increase profitability. While credit and human capital constraints (i.e. lack of training) have frequently been highlighted as potential barriers, another constraint may be limited attention. Most people face constant tradeoffs between investing attention in work versus in other matters, such as homelife. The poor may face comparatively greater challenges in maintaining their homefront (because of higher rates of illness, for example), which may divert attention away from their work. It is possible to test whether this limited attention reduces productivity by focusing on one particular business decision for small firms: how much change to keep on hand to break larger bills. Not having proper change can have an impact of a firm's profit level. If a firm does not have sufficient small bills or coins to give a buyer change, the buyer may choose to buy the item elsewhere and the firm would lose the sale. Evaluation estimates suggest that the average firm in Western Kenya loses 5 to 8 percent of profits due to lost sales because of a lack of small change.

Context of the Evaluation:

The businesses included in this evaluation, which were randomly selected from ten market centers in Western Kenya, included barbers, tailors or other artisans, market vendors, and hardware shops. The typical business was small - only 16 percent of businesses had any salaried workers - and approximately 55 percent of firms were operated by women. Losing sales because of insufficient change was a common problem for these firms. At the baseline, over 50 percent of firms reported having lost at least one sale in the previous 7 days because they did not have sufficient change. Furthermore, firms spent over 2 hours on average looking for coins or small bills in the previous 7 days. Even firms that had not lost any sales in the past week spent over an hour and a half searching for change for customers.

Design of the Intervention:

To understand whether firms run out of change because they do not fully internalize the profits they are losing, the evaluation proceeded in two phases. First, a field officer visited each firm on a weekly basis to administer a short “changeout” questionnaire, which asked a number of questions about change management, including the number of times they ran out of change (i.e. the number of “changeouts”), the number of lost sales due to changeouts in the previous 7 days, the value of these sales, how much time they spent searching for change, and how often they gave or received change from nearby firms. The survey also asked about total sales and profits. Although the survey did not provide any training or information about change, or any direct "reminders," it may have served as a catalyst for firms to start altering behavior, as lost sales and profits due to poor change management became more salient. To measure this effect, the start date for the changeout questionnaire was randomized across firms. This enabled an estimation of the impact of the visits themselves, by comparing lost sales between those firms that started the survey earlier to those that started later.

The second intervention more explicitly emphasized the costs of having insufficient change. After following firms for several weeks, researchers calculated the lost sales for each firm due to insufficient change as well as the market average. This information was then presented to a randomly selected subsample of firms.

Results and Policy Lessons:

Impact on frequency of changeouts: Veteran firms, meaning firms that had joined the survey early, were, on average, 6 percentage points less likely to experience a changeout in a given week than firms who we had just begun the changeout survey. Firms who were randomly selected for the information intervention were similarly 8 percentage points less likely to experience a changeout than those not selected.

Impact on lost revenue and profits: Veteran firms, because they had fewer changeouts, also lost less income due to lost sales. Specifically, lost revenue for veteran firms decreased by 32 percent and lost profits decreased by 25 percent. Additionally, they also lost fewer sales while away from their shop to get change during the day. The information intervention also reduced lost revenue by 43 percent and lost profits by around 33 percent.

Impact on behavior: Firms that had been in the survey longer seemed to bring in more change to work each morning, but the results were not statistically significant. These veteran firms also visited nearby firms for change on average 2.4 fewer times per week and shared change with other businesses on average 1.1 fewer time per week. Similarly, upon receiving the information, intervention firms began receiving change 1.6 fewer times per week and sharing one fewer time per week. Estimates indicate that overall, behavioral changes resulted in a 12 percent increase in profits.

As the weekly surveys provided no skills training, nor any direct information, it is most plausible that they served as a reminder which made the importance of changeouts and the amount of money being lost more salient. While the information intervention provided some new information (the average behavior of other firms), the firm-specific information would have already been known to firms if they had processed the information. Thus, a likely explanation for the results is that firms were not paying attention to the lost sales to change, and the interventions reduced the cost of processing the information already available to them.

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