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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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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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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A panel discusses the entrepreneurship evaluation in Mexico

A lack of access to finance can impede the potential for growth among small firms. To meet this finance gap and to encourage high-growth entrepreneurship, governments and multilateral agencies throughout the developing world often directly fund small and medium enterprises. Governments, however, have little guidance when it comes to choosing the firms with growth potential, and making sure that limited funds are targeted where they will spur the most growth.

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A microentrepreneur in Ghana interviews with an IPA surveyor

Of the two billion people living on less than $2 per day, roughly half run a business. Finding effective approaches to enhance the productivity and performance of these businesses is considered key to economic growth in many developing economies.

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Microenterprises make up a large portion of employment in the developing world but little is known about constraints on their growth. Researchers partnered with the consulting firm Ernst & Young to test whether providing tailors in Accra with individualized consulting, a sizable cash grant, or both can facilitate growth.

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Millions of people make their living running microenterprises, but these businesses typically fail to expand or provide more than subsistence-level income to their owners.  Giving loans and training to small businesses offer the possibility of helping them grow, but research has not found this to be effective. Yet, much of the existing evidence looks at women-owned businesses, as they are the primary recipients of microfinance programs.

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Policymakers in countries dominated by small and medium-sized firms face challenges in spurring them to grow and hire more workers. In particular, it has been difficult to distinguish entrepreneurs with potential for growth from their “subsistence entrepreneur” peers. Researchers used a national business plan competition in Nigeria to test if selecting winners and offering them $50,000 cash could encourage their firms to grow.

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A cocoa farmer in Sierra Leone

In perfectly competitive markets, higher valued agricultural products should translate into higher prices, putting more money in the pockets of farmers. However, changes in value tend to reach producers at a lower rate in developing economies, which may be a result of the nature of the relationships between farmers and traders in this context.

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Tax evasion generates significant losses in government revenues and distortions in a country’s economic activities. Evasion is of particular concern in developing countries, where the share of the informal economy is typically larger and the government has limited sources of information. Over the last decade, an increasing number of revenue authorities around the world have started collaborating with academic researchers to rigorously evaluate initiatives aimed at increasing tax revenue.

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Small and medium enterprises in developing countries generally face a number of barriers to expanding their businesses and employing more workers, including limited access to credit and other financial services.

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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.

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A simplified financial training based on “rules of thumb” improved business practices and outcomes among microentrepreneurs in the Dominican Republic, while standard, fundamentals-based accounting training produced no significant effect.

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Promoting frequent communication between loan officers and clients can help banks learn about the reliability of existing and potential clients.

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