Micro-entrepreneurs often lack the financial literacy required for the complex financial decisions they face. We conduct a randomized control trial with a bank in the Dominican Republic to compare the impact of two distinct programs: a standard accounting training versus a simplified, rule-of-thumb training that teaches basic financial heuristics. Only the latter produced significant improvements in firms’ financial practices, objective reporting quality and revenues. Looking at treatment heterogeneity, the impact is specially pronounced for microentrepreneurs with lower skills or poor initial financial practices. These results suggest that reducing the complexity of training programs might improve their effectiveness, especially for less sophisticated clients.
American Economic Journal: Applied Economics
March 01, 2013