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Can business training reduce poverty?

Date:22 March 2018
Author:Robert Lensink
Robert Lensink is a professor at the Faculty of Economics and Business of the University of Groningen.
Robert Lensink is a professor at the Faculty of Economics and Business of the University of Groningen.

Is access to finance sufficient on its own to bring people out of poverty? Or is there a need for business training to complement financial access? In a recent paper we investigated this in a large micro-finance institution, Tao Yeu May, in Vietnam.

We used a randomised control trial (RCT) for female clients of a microfinance institution in northern Vietnam. We wanted to assess the impact of business training on business knowledge, practices, outcomes and firm entry and exit decisions. We focused on female clients because many micro-finance initiatives are targeted at financial empowerment of women. A novelty we introduced was to examine if the impact of training depends on the presence of the husbands during the training workshops.

We found some interesting results. First, we found a positive effect of business training on business knowledge of women and profits of their business. We found no positive effect on profit or sales shortly after the training, but participating in the training has strong and long-lasting effect for the success of their business.

The presence of husbands in the training was low, and depended on the financial incentives. The women appreciated the presence of their husbands in the training. However, the participation of the husbands/male did not seem to affect the knowledge or adoption of practices for women. We thought participation of the male could raise the quality of the training because they could share their ideas and experience with female clients, but, this did not matter significantly.

Finally, the experiment seemed to be financially successful. The training only cost $7 per participant, but the profits of the female clients increased by $60 to $80 a year. Our result supports the idea that people with low incomes benefit from a combination of training and access to finance.

For further reading, you can find our paper online here.