Evaluating the “Funneling” Approach to Support Firms

Entrepreneurs in developing countries face a series of diverse constraints to growth, including lack of access to business skills, markets, and finance. The binding constraints vary from firm to firm, implying that the returns to possible interventions are likely to be heterogeneous. Rather than offering similar solutions to every firm, policymakers may therefore get better value for money if they can offer less expensive interventions to a broad range of entrepreneurs (top-of-the-funnel), then screen who is funneled ahead so the more expensive interventions are targeted towards a narrower set of firms that would benefit most from them (bottom-of-the-funnel).

This study aims to test the effectiveness of such a funneling approach in Malawi. Three stages of interventions will be offered (personal initiative training (S1), a managerial capital program (S2) and interventions related to access to markets (S3). A randomized controlled field experiment will assign firms to five different groups. One treatment arm will be assigned to a funneling group and offered to participate in S1 to S3 using a graduate approach where only a subset of those who meet a given score proceeds from one stage to the next stage of training. The other three treatment arms will be offered to participate in one, two or three stages without funneling. Finally a control group will not be offered to participate in any of these stages during the study period but provided with general managerial information (also provided to the other arms).

More information about the approach can be found here.