Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions - Working Paper 107, updated May 2009

Can one teach basic entrepreneurship skills, or are they fixed personal characteristics? A growing number of microfinance organizations are attempting to build the human capital of microentrepreneurs in order to improve the livelihood of their clients and to further their mission of poverty alleviation. In this working paper, CGD non-resident fellow Dean Karlan and his co-author measure the impact of adding business training to a Peruvian group lending program for female microentrepreneurs. Training groups received 30 to 60 minute entrepreneurship training sessions during their normal weekly or monthly banking meeting over a period of one to two years. Their findings--that training leads to increased business knowledge, practices and revenues--are contrary to the presumption (on which the microfinance movement was largely based) that credit constraints alone, not skills, are the obstacle to the entrepreneurial poor. The program also improved client repayment and retention rates. This paper is one in a series of six CGD working papers by Dean Karlan on various aspects of microfinance (Working Paper Nos. 106-111).