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Short-Term Impacts of Targeted Cash Grants and Business Development Services: Experimental Evidence from Entrepreneurs in Burkina Faso

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  • Grimm, Michael

    (University of Passau)

  • Soubeiga, Sidiki

    (University of Passau)

  • Weber, Michael

    (World Bank)

Abstract

Most support programs targeted at small firms in low- and middle-income countries fail to generate transformative effects at a large scale due to bad targeting, too little flexibility, and the limited size of the support, among others. This paper assesses the short-term effects of a randomized targeted Government support program to small and medium-size firms that have been selected based on a business plan competition. One group received large cash grants of up to US$8,000, with flexible conditions of use. A second group received grants of an equally important size but earmarked to business development services and thus less flexible and with a required own contribution of 20 percent. A third group serves as a control group. All firms operate in agribusiness or related activities in a semi-urban area. An assessment of the short-term impacts shows that beneficiaries of cash grants engage in better business practices, such as formalization and bookkeeping. They also invest more. Yet, this does not translate into higher profits and employment. There is no effect on investment and business practices among beneficiaries of grants for business development services. Yet, both treatment groups show a higher ability to innovate relative to the control group. The results also show that cash grants cushioned the adverse effects of the COVID-19 pandemic. A further round of data collection will soon allow to assess the longer-term effects of both interventions which may differ from the short-term effects analyzed here as both interventions may need time to unfold their full effects.

Suggested Citation

  • Grimm, Michael & Soubeiga, Sidiki & Weber, Michael, 2021. "Short-Term Impacts of Targeted Cash Grants and Business Development Services: Experimental Evidence from Entrepreneurs in Burkina Faso," IZA Discussion Papers 14892, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14892
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    References listed on IDEAS

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    1. Michael Grimm & Jens Krüger & Jann Lay, 2011. "Barriers To Entry And Returns To Capital In Informal Activities: Evidence From Sub‐Saharan Africa," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57, pages 27-53, May.
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    3. Cho, Yoonyoung & Honorati, Maddalena, 2014. "Entrepreneurship programs in developing countries: A meta regression analysis," Labour Economics, Elsevier, vol. 28(C), pages 110-130.
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    6. Grimm, Michael & Paffhausen, Anna Luisa, 2015. "Do interventions targeted at micro-entrepreneurs and small and medium-sized firms create jobs? A systematic review of the evidence for low and middle income countries," Labour Economics, Elsevier, vol. 32(C), pages 67-85.
    7. Fafchamps, Marcel & McKenzie, David & Quinn, Simon & Woodruff, Christopher, 2014. "Microenterprise growth and the flypaper effect: Evidence from a randomized experiment in Ghana," Journal of Development Economics, Elsevier, vol. 106(C), pages 211-226.
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    More about this item

    Keywords

    firm support programs; cash grants; finance; matching grants; business development services; agribusiness; randomized controlled trial;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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