Lending Talent, and Money, on a Micro Scale
Murphy, K.

Government agencies and international aid groups have long supported programs that train the world’s poor in how to start and run their own businesses. The training is seen as a way to end hunger and stabilize societies. But interest in these programs has grown lately with the wider availability of microloans, or very small enterprise loans made to the poor. As with any start-up, these businesses are more likely to survive, advocates say, if the owners have basic operational skills.

“There has been a realization in the microfinance community that loan recipients are more likely to succeed if they also receive business education,” said Bobbi L. Gray, research and evaluation specialist with Freedom From Hunger. Indeed, the nonprofit research group Innovations for Poverty Action published a paper in May 2009 that found that Peruvian villagers who had received microloans and had been randomly selected to receive business training performed significantly better than peers who had received loans and no financial education. “Even those who reported having the least interest before getting the training had higher revenues,” said Dean Karlan, a professor of economics at Yale, a founder of Innovations and lead author of the study.

From Botswana to Bolivia, entrepreneurship training has resulted in thriving microenterprises — like soap makers, cocoa processors and handicraft exporters — that would not have existed otherwise. Some programs may gather villagers in huts and use multiple baskets to demonstrate how to allocate capital. Other programs may focus on established but struggling businesses, giving owners DVDs that cover topics like pricing and distribution.

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