Can Boosting Savings and Skills Support Female Business Owners in Indonesia? Evidence from A Randomized Controlled Trial

There is broad evidence of gender gaps in the productivity of microenterprises, which are in part linked to financial and human capital constraints. Existing literature suggests that interventions simultaneously addressing skills and capital constraints can be effective, but there is little evidence to date exploring the combination of skills and savings interventions. This study tests the relative effectiveness and cost effectiveness of providing supply-side incentives to promote agent banking savings accounts, business and financial literacy training for female entrepreneurs, and the combination of the two on women’s businesses and agency in Indonesia. The study took place in 401 villages in East Java in which agent banking products were recently introduced. Although the trial found only small positive effects on the take-up of branchless banking services, both interventions had significant positive impacts on women’s profits. The impacts of the training and mentoring intervention seem to come in part from improved business practices, greater savings, increased business assets, and increased decision-making power. Because the high incentives treatment impacted women’s profits but not any intermediate outcomes the mechanisms are less clear—potentially coming either from a more woman-friendly business environment or through using their husbands’ savings or their existing savings to support their businesses. Although the high agent incentives are more cost-effective than the training and mentoring, policy makers may still prefer the demand-side intervention, as it has more positive implications for women’s overall empowerment and stronger impacts for the poorest quintile of female entrepreneurs.