76387 Finance & PSD Impact OCTOBER 2012 The Lessons from DECFP Impact Evaluations ISSUE 20 Our latest note discusses one of a number of recent impact evaluations of business training programs. See further reading for a link to a critical overview of this new literature Business Training for New and Existing Female-Owned Firms in Sri Lanka Suresh de Mel, David McKenzie, and Christopher Woodruff Self-employment is often seen as an planning on starting a business in the important avenue for women’s economic next year. empowerment. However, most enterprises run by women are subsistence in nature, An important distinction from many other with low earnings levels. Moreover, in many business experiments is that these business parts of South Asia and the Middle East, the owners are not all microfinance clients, but majority of women remain out of the labor instead are more representative of the force. average business or potential business Business training is often seen as one owner. solution, helping women to start new Each of the two samples was businesses and to make their existing randomly allocated into three groups: businesses more productive. But despite  Training only: 200 individuals invited to widespread usage, to date the evidence on training the effectiveness of these programs has been  Training plus grant: 200 individuals slight. invited to training, who received a grant of 15,000 Rs (US$130) conditional on The Experiment finishing training We evaluate the impact of the most  Control group of 228 individuals. commonly used training program worldwide, the ILO’s Start and Improve Follow-up Surveys Your Business (SIYB) training program. Four follow-up surveys were These are 5-6 day courses designed to help conducted, at time intervals corresponding potential entrepreneurs set up a new to 4, 8, 16 and 25 months after training. business (e.g. selection of products, pricing, Attrition rates were relatively low, ranging organization of staff, purchasing of from 6-12%, with information on business equipment, and other inputs) and to help ownership available for 97% of firms. existing businesses grow (e.g. marketing, buying, costing, stock control, record- Results keeping, financial planning).  Training led to improvements in Our experimental sample consists of business practices for existing firms, two groups of women in urban Sri Lanka: although the magnitude is relatively  628 current business owners: a random sample of women working full-time in small: Treated firms implement 2 or 3 businesses earning below the median more business practices, improving profit level (5000 Rs, or about marketing, stock keeping, record $40/month). keeping, and planning, but are still a  628 potential business owners: a random long way from implementing all the sample of women aged 25-45 who were practices the SIYB recommends. out of the labor force and said they were Do you have a project you want evaluated? DECRG-FP researchers are always looking for opportunities to work with colleagues in the Bank and IFC. If you would like to ask our experts for advice or to collaborate on an evaluation, contact us care of the Impact editor, David McKenzie (dmckenzie@worldbank.org)  Training (with or without grants) has Raven test), and when coupled with a no impact on survival of existing firms grant, induces poorer individuals to open  Training along has no significant a business. However, in our case it also impact on profits or sales of existing dissuades more skilled women from firms; training plus a grant does increase opening businesses. profits in the short-term, but this effect  Businesses started by trained firms dissipates over time. However, like the are more profitable up to 2 years rest of the literature, we cannot rule our later: we estimate profits and sales are somewhat sizeable increases or up to 40 percent higher. decreases in profits (±30%). Implications  Training speeds up the creation of new businesses. Figure 1 shows the 1. Training alone does not appear to proportion owning a business by survey be enough to get subsistence round. Within the first year this is much businesses run by women to higher for those receiving training, grow. The binding constraints to especially those with the training and a growth may lay outside the areas grant. However, by 16 and 25 months of capital and skills (e.g. the impacts have disappeared. constraints to participation in wage markets). Figure 1: Impact of Training on Business 2. The results are more encouraging Ownership among Potential Owners for using business training to Proportion owning a business by survey round 0.70 help women out of the labor 0.60 force start businesses more quickly, and for improving the 0.50 profitability and management of n i 0.40 o p t r o these firms. r P0.30 3. The results show the importance 0.20 of following the trajectory of 0.10 outcomes – we would have inferred quite different results if 0.00 4 months 8 months 16 months 25 months we had just done a single one- Controll Training Only Training + Grant year follow-up survey.  Training changes who operates a business: it draws in people with lower analytical ability (as measured by a For further reading see: Suresh de Mel, David McKenzie and Christopher Woodruff (2012) “Business training and female enterprise start-up, growth, and dynamics : experimental evidence from Sri Lanka� World Bank Policy Research Working Paper no. 6145 David McKenzie and Christopher Woodruff (2012) “What are we learning from business training and entrepreneurship evaluations around the developing world?�World Bank Policy Research Working Paper no. 6202. Recent impact notes are available on our website: http://econ.worldbank.org/programs/finance/impact