When is capital enough to get female microenterprises growing? Evidence from a randomized experiment in Ghana

Marcel Fafchamps, Christopher Woodruff, David McKenzie and Simon Quinn

No 8466, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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. We randomly gave cash and in-kind grants to male- and female-owned microenterprises in urban Ghana. Our 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. Second, for women we strongly reject equality of the cash and in-kind grants; only in-kind grants lead to growth in business profits. The results for men also suggest a lower impact of cash, but differences between cash and in-kind grants are less robust. The difference in the effects of cash and in-kind grants is associated more with a lack of self-control than with external pressure. As a result, the manner in which funding is provided affects microenterprise growth.

Keywords: Microenterprises; ghana; conditionality; asset integration (search for similar items in EconPapers)
JEL-codes: C93 O12 O16 (search for similar items in EconPapers)
Date: 2011-07
New Economics Papers: this item is included in nep-afr, nep-exp and nep-mfd
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Citations: View citations in EconPapers (114)

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Working Paper: When is capital enough to get female microenterprises growing? Evidence from a randomized experiment in Ghana (2011)
Working Paper: When is capital enough to get female microenterprises growing? Evidence from a randomized experiment in Ghana (2011)
Working Paper: When is capital enough to get female microenterprises growing? Evidence from a randomized experiment in Ghana (2011)
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