Training talent and lending money go together

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: KATE MURPHY

Government agencies and international aid groups have long supported programmes 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 stabilise societies.

But interest in these programmes 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’s been a realisation 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, a nonprofit organisation in Davis, California, that provides financial education in developing countries.

Indeed, the nonprofit research group Innovations for Poverty Action in New Haven, Connecticut, published a paper in May 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 programmes may gather villagers in huts and use multiple baskets to demonstrate how to allocate capital. Other programmes may focus on established but struggling businesses, giving owners DVDs that cover topics like pricing and distribution.

“A good intervention doesn’t treat everyone the same,” said Bruce McNamer, chief executive of TechnoServe, a nonprofit group in Washington that has worked with entrepreneurs in developing countries since 1968 to expand their businesses and foster economic growth in their communities. “How you help depends on the circumstance.”

McNamer’s group, which works with the US Agency for International Development and the State Department, provides free business consulting services and also sponsors business plan competitions to identify aspiring entrepreneurs in developing countries. “These are usually people who have started a business but they just don’t know how to get from point A to point B,” he said.