Returns to Capital and MSE Management Consulting in Ghana

There are a number of development organizations in Ghana that provide services to micro and small enterprises (MSEs) seeking to expand their operations.  However, as there are few rigorous evaluations of entrepreneurial development programs, IPA is working with local consultants to undertake a rigorous study aimed at understanding the key factors that prevent MSE entrepreneurs from developing and expanding their businesses as well as identifying the value of providing consulting services to them. 

Microenterprises and small enterprises make up a large portion of employment in the developing world. As an alternative to employment in large firms in formal sectors, small enterprises create opportunity for the poor with few resources.  Despite implications for public policy, little is understood about the constraints of these small enterprises. It is unclear which factors prevent small businesses from expanding and employing more workers. This study focuses on two possible constraints, capital and business acumen, in assessing the potential for small business growth.

In Ghana businesses of less than 99 workers (commonly called small or medium enterprises), employ around 66% of the nation’s work force[1].  These businesses are diverse in product offerings, ranging from agricultural produce to crafts to tourism services.  

Ernst and Young, a professional services firm, works in assurance, tax, transaction, advisory services and strategic growth markets.  Around the globe, Ernst and Young works with a range of organizations to provide consulting services, in this case tailors in Ghana. The entrepreneurs participating in the study were diverse: 57% of them were female, they came from 26 different ethnic groups, and spoke 12 different languages at home.  The businesses they operated were in general very small- all had less than 5 employees, and 35% of them had no employees at all.

IPA partnered with Ernst and Young to offer business consulting services to small businesses in the city of Accra. Out of a group of 157 tailors, 77 were randomly selected to receive one year of free consulting services while the others served as a comparison group.  Four consultants from Ernst and Young met with twenty tailors each between February 2009 and February 2010.  Each tailor received an average of ten hours of consulting over the course of the intervention, with the consultants visiting each tailor two to three times per month. All tailors received thirteen training modules on topics like record keeping, time management, and costing, in addition to individualized mentorship.  After six months, a randomly selected38 tailors who were receiving the consulting and 36 additional tailors in the comparison group were awarded a grant of 200 Ghana Cedi (about $133 US) to invest in their businesses.  Eight rounds of surveys were administered to measure the impact of the consulting services, the cash investment, and the combination of the two.

Results forthcoming.