The Impact of Business Training on Small Business Outcomes
By Rohini Pande, Erica Field, Seema Jayachandran, Divya Varma and Summer Starr | Rohini Pande is the Mohammed Kamal Professor of Public Policy at the Kennedy School of Government, Harvard University. Erica Field is an assistant professor in the Department of Economics, Harvard University. Seema Jayachandran is an assistant professor in the Department of Economics, Stanford University. Divya Varma is a research associate at the CMF. She is currently based in Ahmedabad and managing three research projects with SEWA. Summer Starr was an intern at the CMF this summer. She is currently an international relations and pacific studies student at University of California, San Diego.

The Centre for Micro Finance, in collaboration with SEWA Bank in Ahmedabad, has undertaken a field experiment to examine the impact of business training on SEWA's members' financial and business behavior. The primary research questions explored are the impact of a scalable business training program and the effects of receiving training with a peer. We are currently conducting a midline survey to examine the impact of training on business and financial outcomes and aspirations. Here, we report preliminary results based on clients' saving and borrowing behavior with SEWA. A key motivation underlying efforts to expand microfinance and micro-savings is that providing credit and banking opportunities to the poor will increase their economic opportunities and generate long-run income growth, thereby helping them out of poverty. However, these services reduce poverty only if the poor are adequately positioned to take advantage of borrowing and savings opportunities to improve household and business financial management. In reality, many are not in such a position. Many of the poor lack human capital and have limited information about business and other economic opportunities. These problems are often amplified for women, who may face constraints on mobility and lack social networks to assist them with information and skill acquisition. These factors, combined with the fact that MFI clients tend to operate in high-risk environments, suggest that the returns to entrepreneurial skills and information about business opportunities gained through business training may be particularly high. From a sustainability perspective, MFIs have an interest in business training as a catalyst to savings and loan repayment, as it helps their clients learn about loan and savings opportunities and manage their limited resources. For this reason, it is important to conduct an impact evaluation to measure the cost and benefits of trainings and understand how they can be most effectively structured for the largest impact and for scalability. In this setting, using a randomized field experiment for evaluation is relevant since voluntary trainings are generally attended by the most outgoing, well-performing, or entrepreneurial clients. The Centre for Micro Finance, together with SEWA, has conducted a randomized impact study that investigates the impact of a streamlined, scalable training model as well as the effect of training with a peer.

Setting
Shri Mahila SEWA Sahkari Bank was created in 1974, by the Self Employed Women's Association (SEWA) in the city of Ahmedabad, Gujarat. The bank's 170,000 member–clients are primarily women who work in the informal sector in home-based occupations such as bidi rolling, incense stick making, and tailoring, as well as vegetable vending, construction work, and rag picking. SEWA Bank is unusual in that it mainly engages in urban individual lending, unlike the rural joint liability and self help group models used in most other Indian MFIs.For four years, SEWA Bank has run a five-day program on financial literacy, which uses lessons, games, and movies to teach modules on accounting skills, interest rates, avoiding excess debt, and the importance of long term “life-cycle” planning. Recently, it began a second five-day course, meant to supplement its financial literacy training, which teaches business skills such as marketing, cost reduction, investment, and customer service.

Design of the study training module
We designed a streamlined training module aimed at maximizing the potential to scale up such a program to micro-finance clients in other settings. The short training maximizes the efficacy of information provided to the clients. Moreover, combining financial literacy and business training can be best suited to illiterate self-employed women lacking basic numeracy skills, yet must make sound business decisions.In addition, a shorter training might attract more participants as the opportunity-cost with respect to income and time are lower. The module was designed after a series of focus group discussions with women who had attended SEWA trainings in 2006. We used information on what elements of the training they found the most useful, what they implemented in the short run and what they retained or abandoned in the long run to condense the two five-day trainings into a two-day training (a total of 4 hours) costing approximately Rs.157 per student. Our training had a few unique features. During the training, women would work in groups to identify one or more financial or business goals and sources of wasteful expenditure and sub-optimal business practices. Women were then encouraged to cut wasteful expenditures and put the money into savings. We introduced an inspirational element in the training, in the form of a movie, showcasing the lives of a few successful SEWA members, who have used good financial practices to bring themselves out of poverty. This helped participants visualize themselves as being able to take control of their lives and finances and tackle poverty effectively. Another unique feature was that half of the participants were invited to come alone and the other half were invited with friends. This primarily was to investigate if coming with peers has an influence on take-up, participation in class, retention and reinforcement of the training lessons.

Study Protocol
To evaluate the training module we selected 634 SEWA clients, of which a randomly sampled 423 were invited to training. The remaining 211 women serve as a comparison, or control, group. All women in the sample were either actively saving or borrowing from SEWA Bank between December 2004 and January 2006. The women in our sample were between ages 18 and 65 and were either business owners, piece-rate workers, or self-employed. Between September 2006 and April 2007 we ran training sessions thrice a week. For each session, twelve women were invited from our sample, among which four were in the control group and not trained; four were invited with a friend and four were invited alone. The division of the treatment group into those invited with a friend or not was also randomized. To recruit the women for training, two women working with CMF went to invite each woman accompanied by a local SEWA bank officer, or “bank saathi.”

Preliminary Results
We are currently conducting a detailed survey aimed at understanding how the training affected business and financial outcomes and women's aspirations. Here we report findings based on women's saving and loan behavior as observed in SEWA's bank transactions data. We find that the business training increased borrowing in general and savings for the peer-trained cohort. Figure 1 shows that the amount of new borrowing increased in general by Rs.772 with a slightly larger increase for those trained individually.

TThe results for the peer-trained group for borrowing are statistically insignificant. In part, this is probably driven by the fact that women trained with a friend chose to increase saving – we find the monthly savings of (only) the peer treated group increased by about Rs.217 per month. As we see in Figure 2, the effect on those individually trained may be negative, although, again, the results are not statistically significant.

Importantly, the uptake of the training differed by treatment group, with 69% of those invited to peer train attending and 63% of those invited to train individually. However, the difference is not very large suggesting that being invited by a friend is not having a large effect on mobility for the average woman. The peer focus groups also partially confirm this -- the majority of women stated that they would have attended the training even without their peer. A couple of women stated that they would not feel comfortable coming without their peer, because it was not natural for women in their social circles to travel alone. A further investigation into the precise social structures that promote or hinder this kind of mobility would have to be done to understand this effect in more detail. (Also see Text Box: Experience for Shobhana)

Future Directions
Our findings suggest several future avenues of research. For example, the significant impact of the peer training on savings has made us interested in a follow-up impact study that investigates why peers affect learning. Specifically, we would like to augment the study design to distinguish between the hypotheses that the woman learned more in the classroom by virtue of having her friend there or that learning at the same time and in the session does not matter, but having your friend go through the same type of training means you are able to discuss the material afterwards which reinforces learning. Our proposed study would sometimes train a woman and her friend in the same session and other times train them both but on different days or in different classrooms.

Conclusions
Financial literacy and business training programs are being developed and used by an increasing number of MFIs. The models being used differ significantly across MFIs, but we have very few evaluations of what works in such trainings and why. There are also very limited cost analyses of such programs.