Publication: Capital, Gender, and Microenterprise Growth in Ghana
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Date
2011-06
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2011-06
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Despite the emphasis placed by microfinance organizations on lending to female business owners, evidence from three recent randomized controlled trials has cast doubt on the ability of capital alone to grow female-operated microenterprises: in my own previous experiment in Sri Lanka women given grants saw no increase in business profits, while the recent randomized trials of microfinance in the Philippines and India also see very little in the way of profit increases when women get loans. One possible interpretation is that female-owned microenterprises in these countries are already operating at their efficient level of capital, which might be very low especially in countries where other labor market options for women are limited. However, an alternative explanation could be that the small scale of many female-owned firms is not efficient, but arises instead from a lack of separation of business and household accounts, and from inefficiencies in the way people allocate assets between them. These inefficiencies might arise from self-control problems, leading owners to not undertake profitable investments, or from external pressure to share with others.
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“Fafchamps, Marcel; McKenzie, David; Quinn, Simon; Woodruff, Christopher. 2011. Capital, Gender, and Microenterprise Growth in Ghana. Finance & PSD Impact; No. 14. © World Bank. http://hdl.handle.net/10986/10093 License: CC BY 3.0 IGO.”
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Publication When is Capital Enough to Get Female Enterprises Growing? Evidence from a Randomized Experiment in Ghana(2011-06-01)Standard models of investment predict that credit-constrained firms should grow rapidly when given additional capital, and that how this capital is provided should not affect decisions to invest in the business or consume the capital. The authors randomly gave cash and in-kind grants to male- and female-owned microenterprises in urban Ghana. Their findings cast doubt on the ability of capital alone to stimulate the growth of female microenterprises. First, while the average treatment effects of the in-kind grants are large and positive for both males and females, the gain in profits is almost zero for women with initial profits below the median, suggesting that capital alone is not enough to grow subsistence enterprises owned by women. 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