The Small and Medium Enterprise (SME) Program at IPA discovers and promotes effective solutions to the constraints faced by entrepreneurs and SMEs in developing countries. SMEs are the largest generators of employment in the developing world, creating nearly 60% of new jobs. They also generate a myriad of opportunities across sectors and geographic areas, and employ broad and diverse segments of the labor force. SMEs in developing countries, however, face constraints that are disproportionately large compared to those faced by larger firms and by SMEs in developed countries. Limited access to finance, low levels of human capital, and difficulty accessing markets stand out as some of the most challenging barriers to business growth.
IPA Zambia is pleased to share its second quarter bulletin of 2017. This bulletin features updates on our research projects on improving public services by improving staff allocation; trust, spontaneous clusters, and the growth of urban small- and medium-sized enterprises; and interpersonal communication to encourage use of the Maximum Diva Woman's Condom. This bulletin also highlights IPA Zambia's presentation of preliminary results from the Girls Negotiation study in early May.
In Burkina Faso, Côte d'Ivoire, and Mali, we have continued our global tradition of rigorous, applicable research by building foundational research capacity and conducting evaluations in areas of pressing national concern. Examples of our work below offer promising insights into everyday issues that affect the lives of the Francophone West African poor.
Over the past five years, the SME Program at IPA has grown from an ambitious idea to a thriving, prolific, and influential initiative. It is with great enthusiasm that we share this report highlighting some of our accomplishments—which would not have been possible without the collaboration and support of so many of you.
Our work began at the end of 2010, when we sat down with leading practitioners and academics working on entrepreneurship and SME growth in developing countries, and assessed the most pressing knowledge gaps in the sector. At the time, only a handful of impact evaluations had been conducted on SME support programs in developing countries, and there was an urgent need for evidence to help guide decision-making.
Following that initial event, IPA launched the SME Program (formerly known as the “SME Initiative”), with the goal of addressing the existing knowledge gaps and generating evidence on the most effective solutions to the constraints SMEs face in developing countries. Since then, our network of researchers and practitioners has continuously expanded, and has regularly come together at our conferences, working group meetings, roundtables, and workshops. New partnerships have emerged from these gatherings and from the SME Program’s support in identifying and promoting new research opportunities.
Over the past five years, IPA’s research portfolio in the SME sector has grown to include more than 85 studies in 32 countries, leading to valuable lessons learned that can inform the design of more effective policies and programs. Our hope is to see this research used to help SMEs succeed and generate sustainable livelihoods.
In this report, we present some highlights from the SME research portfolio, lessons learned in each of our program’s focus areas, details about the events we have hosted, and information about what we do to support, create, and promote evidence in the SME sector.
The relationships we have built and the evidence we have helped generate over the past five years have already started to make a difference in the SME sector. These achievements would not have been possible without the commitment, passion, expertise, generosity, and hard work of our research affiliates, partners, donors, and IPA staff across the world. To all of them, we are deeply grateful.
Many important questions remain unanswered and there is still much to be done to bridge the gap between the worlds of research and practice. We are eagerly embarking on the next phase of bringing a culture of evidence-based decision-making to the SME sector.
This paper presents an experimental approach to measure competition in agricultural markets, based on the random allocation of subsidies to competing traders. We compare prices of subsidized and unsubsidized crop traders to recover the key market structure parameter in a standard model of imperfect competition. By combining the experimental results with quasi-experimental estimates of the pass-through rate, we also estimate market size, or the effective number of traders competing for farmers’ supply. In the context of the Sierra Leone cocoa industry, our results point to a competitive agricultural trading sector and suggest that the market size is substantially larger than the village. The methodology developed in this paper uses purely individual-level treatment to shed light on market structure. This approach may be useful for the many cases in which market-level randomization is not feasible.
Targeted interventions that sustainably improve the lives of the poor will be a critical component in eliminating extreme poverty by 2030. The poorest households tend to be physically and socially isolated and face disadvantages across multiple dimensions, which makes moving out of extreme poverty challenging and costly. This paper compares the cost-effectiveness of three strands of anti-poverty social protection interventions by reviewing 30 livelihood development programs, 11 lump-sum unconditional cash transfers, and seven graduation programs. All the selected graduation initiatives focused on the extreme poor, while the livelihood development and cash transfer programs targeted a broader set of beneficiaries. Impacts on annual household consumption (or on income when consumption data were not available) per dollar spent were used to benchmark cost-effectiveness across programs. Among all 48 programs reviewed, lump-sum cash transfers were found to have the highest benefit-cost ratio, though there are very few lump-sum cash transfer programs that serve the extreme poor or measure long-term impacts. Livelihood programs that targeted the extreme poor had much lower benefit-cost ratios. Graduation programs are more cost-effective than the livelihood programs that targeted the extreme poor and measured long-term impacts (i.e., at least one year after end of interventions). More evidence is needed, especially on long-term impacts of lump-sum cash transfers to the extreme poor, to make better comparisons among the three types of programs for sustainable reduction of extreme poverty.
IPA Zambia is pleased to share with you its final bulletin of the year: "2016 in Review." This bulletin highlights ten of IPA Zambia's research projects, including updates from projects included in the previous bulletin as well as new contributions. We hope you enjoy this look at the high-quality evidence we've generated this past year, and we look forward to continuing this work with you in the year ahead.
We use a field experiment to show referral-based hiring has the potential to disadvantage qualified women, highlighting another potential channel behind gender disparities in the labor market. Through a recruitment drive for a firm in Malawi, we look at men's and women's referral choices under different incentives and constraints. We find that men systematically refer few women, despite being able to refer qualified women when explicitly asked for female candidates. Performance pay also did not alter men's tendencies to refer men. Additionally, women did not refer enough high quality women to offset men's behavior.
We conduct a randomized experiment that generates exogenous variation in the access to foreign markets for rug producers in Egypt. Combined with detailed survey data, we causally identify the impact of exporting on firm performance. Treatment firms report 16-26 percent higher profits and exhibit large improvements in quality alongside reductions in output per hour relative to control firms. These findings do not simply reflect firms being offered higher margins to manufacture high-quality products that take longer to produce. Instead, we find evidence of learning-by-exporting whereby exporting improves technical efficiency. First, treatment firms have higher productivity and quality after controlling for rug specifications. Second, when asked to produce an identical domestic rug using the same inputs and same capital equipment, treatment firms produce higher quality rugs despite no difference in production time. Third, treatment firms exhibit learning curves over time. Finally, we document knowledge transfers with quality increasing most along the specific dimensions that the knowledge pertained to.
Una capacitación financiera simplificada basada en reglas prácticas mejoró las prácticas de negocios y los resultados económicos de microempresarios en República Dominicana, mientras que una capacitación técnica basada en principios contables tradicionales no produjo impactos significativos.
El acceso a servicios nancieros es crucial para el crecimiento de la Pequeña y Mediana Empresa (PyME). Estos servicios permiten a los emprendedores innovar, incrementar su e ciencia, expandirse a nuevos mercados y crear nuevos puestos de trabajo. Sin embargo, la mayoría de las PyMEs en países en desarrollo son incapaces de conseguir el nanciamiento necesario para alcanzar su potencial. Proporcionar nanciamiento a las PyMEs en dichos países puede ser riesgoso y costoso para los prestamistas, lo que ha llevado a una brecha de crédito de aproximadamente un billón de dólares (IFC, 2011).
Para reducir la brecha de crédito, instituciones nancieras, gobiernos y donantes han invertido en una gran cantidad de programas y políticas orientadas a proporcionar a las PyMEs el nanciamiento necesario para crecer e innovar. No obstante, la e cacia de estos programas en reducir los obstáculos para el nanciamiento de las PyMEs no ha sido evaluada con rigor. El Programa PyME en Innovations for Poverty Action (IPA) evalúa posibles soluciones y promueve las maneras más e cientes y económicas de expandir el acceso al nanciamiento de las PyMEs.
Read the English version here.
This paper identifies separate and unique pathways to profits among small businesses in South Africa that are exposed to marketing or finance training in a randomized control study. The marketing group achieves greater profits by adopting a growth focus on higher sales, greater investments in stock and materials, and hiring more employees. The finance group achieves similar profit gains but through an efficiency focus on lower costs. Both groups show significantly higher adoption of business practices related to their respective training program. Consistent with a growth focus, marketing/sales skills are significantly more beneficial to firm owners who ex ante have less exposure to different business contexts. In contrast and in line with an efficiency focus, entrepreneurs who have been running more established businesses prior to training benefit significantly more from finance/accounting skills.
Can innovation among micro-entrepreneurs in South Africa teach global corporations a lesson? Rajesh Chandy, Stephen Anderson-Macdonald and Bilal Zia reckon so.
Mass poverty is a huge world problem, typically addressed through multibillion aid programmes. But a grassroots research project in South Africa’s impoverished townships suggests another, sustainable solution. It isn’t the first study into the impact of skills training on microentrepreneurs in developing countries. But prior initiatives have tended to show that any benefits are small or short-lived. This project is remarkable because it is the first to demonstrate the opposite. “You can solve many of the problems of poverty and growth in the world by doing better business,” says LBS’s Rajesh Chandy, one of the three academics who devised the project. “Microentrepreneurs represent the most common type of business in the world. Yet we tend to ignore them – even though they are hiding in plain sight. If we can help them transform their business lives, then we will probably also transform the lives of their communities, given the prevalence of these kinds of businesses.” Not only that, but the lessons learnt that will inform policy in emerging economies such as those in southern Africa could also be applied in developed markets. “By studying the lives of business people many thousands of miles away, we might even learn a bit about ourselves,” says Chandy.
Loans and business management training helped men grow their small business profits, but women did not experience any impacts on their businesses as a result of loans, training, or grants.
Using a randomized evaluation with 432 Mexican small and medium enterprises, this paper shows that access to management consulting led to better firm performance: one-year results show positive effects on return-on-assets and total factor productivity. Owners also had large increases in “entrepreneurial spirit” (an entrepreneurs’ managerial confidence index). Using Mexican social security data, the analysis finds a large increase in the number of employees and total wage bill several years after the program. The paper documents large heterogeneity in the specific managerial practices that improved as a result of the consulting, but there is no singular mechanism as a panacea for all firms.