Few microenterprises grow and employ more than one worker, and policymakers have struggled to identify what keeps these businesses from growing further. To study these limitations, researchers offered microentrepreneurs capital to incentivize them to hire. Results showed that a wage subsidy did not lead to lasting increases in employment sales or profits.

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Prior evidence on small grants programs to female-owned businesses has found that women entrepreneurs are less likely to invest this capital into their businesses than men are. The intersection between household and business needs seems to play a role in this.

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While workers in larger firms tend to be more productive than those in smaller ones, the underlying reasons for these differences are unclear. In India, researchers are conducting a randomized evaluation among data entry employees, to measure the impact of different work arrangements (office- versus home-based) on worker productivity.

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Business training programs aim to instill standardized management practices in participants in hopes that these will help raise business performance. However, decision makers and researchers have struggled to find conclusive evidence on the firm-level impacts of these trainings.

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Credit: World Bank Erick Kaglan

What makes someone a successful entrepreneur? Is it a matter of teaching the right business skills, or instilling a proactive entrepreneurial mindset? If the latter, can these personal qualities be taught? This research in Togo investigated these questions, and found that a training focused on personal initiative skills, such as self-starting, future-oriented, and persistent behavior, was more successful than a traditional business training at increasing sales and profits.

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Do low levels of trust limit the spread of ideas and knowledge among small-scale firms in African cities? A new study provides micro-level descriptive evidence on the spatial patterns of economic activity among small business owners in one of the fastest-developing cities in southern Africa: Lusaka, Zambia. Innovations for Poverty Action worked with researchers to collect new survey data to investigate the relation between knowledge sharing, trust, and business agglomeration within the city.

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Access to quality jobs is a pressing concern in sub-Saharan Africa. Researchers have partnered with Samasource and Innovations for Poverty Action to conduct a randomized evaluation measuring the impact of a digital vocational training program, with and without an employment program, on formal employment of young Kenyans.

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Millions of people in developing countries work in the informal sector, due in part to significant barriers to registering one’s business and entering the formal sector. In this study, researchers carried out a randomized evaluation in Malawi, within the context of the World Bank Business Environment Strengthening Technical Assistance Project (BESTAP), to measure the impact of formalization on the business performance of micro-, small and medium enterprises (MSMEs).

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While evidence suggests that microloans are not effective in reducing poverty, providing microenterprises with larger loans may be more effective in helping them grow, reducing poverty, and increasing business opportunities for microfinance lenders.

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Compared to their counterparts in high-income countries, small and medium enterprises (SMEs) in low-and-middle-income countries, are often less productive, grow slower, and hire fewer workers. In Mexico, Innovations for Poverty Action worked with researchers to test if this lagging productivity could owe to lower managerial capacity. They found that providing subsidized managerial consulting to Mexican SMEs boosted their productivity and hiring.

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Micro-loans are a promising means of promoting entrepreneurship[1], but conventional loan products are often unsuited to the needs of small businesses in developing countries. Offering microenterprise borrowers the ability to postpone loan payments when needed may encourage long-term investments in business expansion and help owners cope with financial hardship.

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Entrepreneurs in developing countries face a number of constraints that limit their growth and therefore their contribution to employment and long-term economic development.

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Credit: Erik Charlton / Flickr
Small and medium enterprises (SMEs) are thought to be an important source of innovation and employment. While there is a lot of research on the barriers to SME growth at the individual firm level, there is little evidence on the role of business networks in firm growth.
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Sub-Saharan Africa is undergoing rapid demographic growth. While formal unemployment is low, wage job opportunities are also limited. In this context, a vast majority of young people are engaged in low-productivity self-employment. Traditional apprenticeships are one of the most common sources of skills acquisition for youths. Many governments attempt to intervene in the apprenticeship market, but there is limited evidence on the impacts of these public interventions.

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When small or informal firms are invisible or inaccessible to large buyers, including governments, these firms cannot grow and reach their full potential.  Innovations for Poverty Action is working with researchers to evaluate whether a bid training provided by Building Markets that intends to teach businesses how to find, apply for, and win larger contracts can help small businesses grow.

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