Please use this form to submit your study for inclusion into our database. It will be checked by a member of the Innovation Growth Lab team, who may be in contact to ask for more information. Your email address * Your name * Title * The name of the study Short summary A business and financial literacy programme in Bosnia and Herzegovina showed no effect on business survival but appeared to have some limited effects on improving participant's business practices. A brief description of the project's goals and its current state Abstract <p>Identifying the determinants of entrepreneurship is an important research and policy goal, especially in emerging market economies where lack of capital and supporting infrastructure often imposes stringent constraints on business growth. This paper studies the impact of a comprehensive business and financial literacy program on firm outcomes of young entrepreneurs in an emerging post‐conflict economy, Bosnia and Herzegovina. The authors conduct a randomized control trial and find that while the training program did not influence business survival, it significantly improved business practices, investments, and loan terms for surviving businesses. Entrepreneurs with higher ex-ante financial literacy further exhibited some improvements in business performance and sales.</p> The full abstract of the study, if available Links http://www.tandfonline.com/doi/pdf/10.1080/19439342.2013.780090 Links to any published papers and related discussions Authors * Affiliations Academic and other institutes that the authors of the study are members of Delivery partner Organisations involved in delivering the trial, if appropriate Year Year Year199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023202420252026 Month MonthJanFebMarAprMayJunJulAugSepOctNovDec Day Day12345678910111213141516171819202122232425262728293031 Journal Journal publishing the study, if available Publication stage * Working Paper Published Ongoing Research Forthcoming Discussion Paper Research theme * Entrepreneurship Innovation Business Growth Country Country or countries where this study took place. Topics What sort of topics does the study cover? Sample attributes Hypotheses / research question Can a business and financial literacy programme help entrepreneurs and improve their firm outcomes? Sample Trial population and sample selection All study participants are Partner's loan clients who took out a business loan. Those considered as delinquent are dropped. The sample is limited to areas around Tuzla. All 2274 Partner clients meeting these criteria received an initial screening phone call, asking them whether they would be interested in participating in a business and financial education training course. About 500 clients could not be reached over the phone. Among the 1783 clients who were reached, half reported being interested in participating in the course. Eventually, 445 active business loan clients were reported. Number of treatment groups Size of treatment groups Group 1: 149 individuals; Group 2: 148 individuals Size of control group Unit of analysis Clustered? Yes No Cluster details Trial attributes Treatment description Six comprehensive modules lasting 9 hours in total. The first module discussed general concepts of entrepreneurship, including advantages and disadvantages of being an entrepreneur, how to recognise a business opportunity, and basic decisions related to the business, such as legal types and tax regimes. The second module stressed the importance of business planning and explained how to develop a business plan. The third module covered marketing and sales strategy. The fourth module went over financial management, including accounting, planning, and separation of business and personal household accounts. The fifth module focused on business growth, exploring deeper concepts such as business investment and growth strategies and highlighted the advantages of up-front capital investment. The sixth and final module covered a range of issues related to financial literacy. It reviewed different sources of external finance and stressed the importance of financial responsibility. It also discussed interest rate calculations, diversification and concepts related to consumer protection, that is, understanding contract terms Rounds of data collection Baseline data collection and method Partner client database and baseline survey collecting information on financial and business knowledge, education, risk aversion, business employment, assets, expenditures, sales, profits and use of external finance Data collection method and data collected Evaluation Outcome variables <p>Business & Financial Knowledge and Perceptions: Examined results from exit test, so only viable for those completing training. Business Creation & Survival. Business Performance: One-month profits, maintained, increased, or decreased monthly profits compared to one year earlier? Business Growth: Maintained, increased, or decreased monthly sales compared to one year earlier? Employee number; installation expansion. Business Practises & Investments: Self-reported business practises and investments. Loan Behaviour (treatment effect): Training had an effect on the number of loans taken out from partner, characteristics of new loans taken out from Partner; loan default and restructuring.</p> Results <p>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.</p> Intervention costs Not available. Cost benefit ratio Reference Bruhn, M., & Zia, B., 2013. 'Stimulating Managerial Capital in Emerging Markets: The Impact of Business and Financial Literacy for Young Entrepreneurs'. Citation for use in academic references
