Money or Management? A Field Experiment on Constraints to Entrepreneurship in Rural Pakistan

Xavier Gine and Ghazala Mansuri

Economic Development and Cultural Change, 2021, vol. 70, issue 1, 41 - 86

Abstract: This paper identifies the relative importance of human and physical capital for entrepreneurship. Microfinance clients were offered business training and a loan lottery of up to seven times the average loan size. Business training increased business knowledge, reduced business failure, improved business practices, and increased household expenditures by US$82 per year. It also improved financial and labor allocation decisions. These effects are concentrated among male clients, however. Access to larger loans, in contrast, had little effect, perhaps because current loan sizes already meet the demand of most clients. Despite these positive impacts, business training was not cost-effective for the lender.

Date: 2021
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