Stimulating Managerial Capital in Emerging Markets: The Impact of Business and Financial Literacy for Young Entrepreneurs

Business & Financial Knowledge and Perceptions: The fraction of correct answers in test is significantly higher for 3/8 questions. Participants did significantly worse in 2/8 questions. Total score increased significantly after training, on average from 2.6 to 2.9. Business Creation & Survival: Training had no significant effect on whether study participants had a business at follow‐up. Business Performance: On average, training didn't increase business profits. However, the heterogeneous treatment effects analysis suggests that the training increased profits for individuals with above median financial literacy at baseline, compared to the control group on average. This effect corresponds to a 54% increase in profits; this is only significant at the 15% level. On average, entrepreneurs in the treatment group were not significantly more likely to have said that their profits increased over the past year, compared to the control. As with profits, entrepreneurs with above median financial literacy at baseline were 14.3% more likely than peers in control to have stated that their profits increased over the past year. Business Growth: No significant increase of the training on whether sales increased over the past year, on average. Entrepreneurs with above median financial literacy at baseline were 16.7% more likely to say sales increased over the past year than their peers in the control group. No significant effect of the training on employee number or installation expansion. Business Practises & Investments: Entrepreneurs in the treatment group are 22% less likely than entrepreneurs in the control group to use personal accounts for their business. Training didn't have a significant effect on using credit cards for the business. Training caused treatment group to be 10.6% more likely to invest their savings in the business than the control group. We also find that treatment group entrepreneurs were 16.5% more likely to have implemented new production processes than control group. On the other hand, no significant effect of the training on developing new products and on starting new marketing campaigns. Aggregate impact on business investments is large, positive, and statistically significant, when RHS aggregated z-scores are computed for all outcome measures Loan Behaviour (treatment effect): No statistically significant effect of the training on the probability of taking out a loan or the number of loans taken out from Partner in the post‐training period. Training did not significantly change the average loan amount but there was significant treatment effect on the number of installments; treatment entrepreneurs are more likely to negotiate a larger number of installments than control group entrepreneurs. Treatment effect on loan payments being past due and loan write‐off is negative, but not significant. Treatment group is 3.4 % more likely than control to refinance its loans with Partner.