Ever since Muhammad Yunus founded the Grameen Bank in Bangladesh in 1983, microfinance targeting poor women has been the talk of the town among development economists. Unfortunately, more and more evidence suggests that women are, in fact, not as successful in the role of business owners as men. Erica Field and her co-authors conducted a randomized control trial in India, finding that women are not necessarily worse entrepreneurs, but that the low number of successful female peers may hamper women’s success in business.
How did they show this?
Field et al. (2016) worked with India’s largest women’s bank, offering a two-day business course to a random sample of female customers. Half the participants were asked to bring a friend along to the training, the other half came alone. They also had a control group of women who did not attend the training. Four months later, the researchers compared how the women had changed their business practices. They found that only those who attended the training with a friend increased their business activity. To be precise, they were 7 percent more likely to take out a loan from the bank than those who had attended the training without a friend. They also reported a higher household income and were less likely to describe themselves as housewives.
Why might friendship be good for business?
One could think of many reasons why having a peer might be good for business. The authors hypothesize that women have more business confidence when they feel supported by their peers. However, when they asked women about this in their follow-up survey, this did not seem to be the case.
Another hypothesis is that women who have a better network have better access to labor, information, and capital. After all, you would expect that friends help each other out. But again, according to the surveys, this did not turn out to be true.
What they found instead was that women who attended the course with a friend set fundamentally different business goals for themselves from the start. Attending the workshop with a friend helped the women identify what they wanted to achieve. Field et al. also find that the effects described above are particularly strong for women coming from casts who face restrictive social norms. Having a peer was particularly important for those women’s business success.
What shortcomings does this study have?
The researchers test the effect of receiving the training on many indicators – and find that it does not affect many of them significantly at all. For instance, there was no significant effect on earnings set aside for business investments or cost reductions. This implies, perhaps not surprisingly, that a two-day business course is not sufficient to turn anyone into a great entrepreneur.
Conclusion
This study suggests that programs supplying women with grants or loans could yield better results when involving peers in business trainings. This is particularly true when working with women from restrictive social backgrounds.
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