Fafchamps, Marcel, McKenzie, D., Quinn, Simon and Woodruff, Christopher (2011) When is capital enough to get female microenterprises growing? Evidence from a randomized experiment in Ghana. Working Paper. Coventry, UK: Department of Economics, University of Warwick. CAGE Online Working Paper Series, Volume 2011 (Number 50).

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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 effect 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.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HB Economic Theory
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Business enterprises -- Ghana , Capital investments -- Ghana, Small business -- Finance , Government aid to small business -- Ghana, Businesswomen -- Ghana
Series Name:	CAGE Online Working Paper Series
Publisher:	Department of Economics, University of Warwick
Place of Publication:	Coventry, UK
Official Date:	June 2011
Dates:	Date Event June 2011 Published
Volume:	Volume 2011
Number:	Number 50
Number of Pages:	50
Institution:	University of Warwick
Status:	Not Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
Funder:	World Bank

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