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Business Training for Microfinance Clients: How It Matters and for Whom
by Veronica Frsancho, Dean Karlan, Martin Valdivia in 2008
World Region: Latin America & The Caribbean
The study was conducted with FINCA-Peru, an MFI that sponsors village banks for poor, female microentrepreneurs. Using the credit with education model, the experiment assigned clients randomly to either treatment or control groups. Treatment groups received thirty to sixty minute entrepreneurship training sessions during their normal weekly group banking meeting. This activity was sustained for a period of 1 – 2 years. Control groups met weekly with the group banking program solely for making loan and savings payments. The study found strong benefits for the MFI in the form of higher loan repayment and client retention;improved business processes and knowledge by the clients; an increase in business sales and a reduction in the fluctuation of business revenue; significant heterogeneity in client exposure within the treatment group. The paper demonstrates that educating female entrepreneurs with access to credit about successful business practices can help both the client’s business and the MFI.