In the last couple weeks, several entries have discussed how borrowers in low-income households use loans, and whether they use them wisely. A related question comes to mind; if borrowers are possibly not making the most prudent use of capital, would training help? Moreover, what about those women who run small businesses (a target population of microfinance); would they more effectively run their businesses and manage their finances after business training support?
An ongoing CMF study (here), in collaboration with SEWA Bank in Ahmedabad, explores the impact of business training on client savings and credit behavior. 423 randomly sampled SEWA clients were invited to the training, and the women in the sample were between 18 and 65. Another third (211 women) were included in the sample, but were not invited to the training, and were the study's control group. These women needed to be either business owners, piece-rate workers, or self-employed to be included in the sample. The course, which SEWA developed to supplement its financial literacy training, teaches business skills such as marketing cost reduction, investment, and customer service. For each session, 12 women were invited from the random sample, among which:
- Half were invited with a friend; and
- Half were invited alone
Through analysis of SEWA Bank’s transactions database, we find that, compared to the control group, those trained with a peer increased their monthly savings per by 217 Rs. Interestingly, those trained individually actually decreased monthly savings. See the table below for a visual representation of the findings.
Why does training with a peer influence the savings behavior of clients? At this point, we are not sure. It may be positive peer pressure (and a commitment device); the trainees learn about the importance of savings during their course, friends commit to saving a certain amount, and then friends remind one another of the lessons learned. Or, the real reason may be very different from the proposed one above; it’s hard to know without studies that further isolate peer impact.
But, if training with a friend can help improve financial outcomes, finding out the real reason behind this success is worth exploring. Hopefully, CMF will have more to share on the topic after the completion of this study.
3 comments:
Fascinating post. As I recall, another interesting result from the preliminary analysis was that, for some reason, women working as tailors seemed to benefit more from the training than women in other professions. Ami mentioned that participants in the conference in which these preliminary results were presented surmised that this may be because tailoring is traditionally a female dominated profession and therefore women tailors may feel less qualms about expanding their businesses than women in other professions.
Very interesting study. I am not sure what to make of the findings though. Some of these research projects are somewhat "model free" and I worry about the absence of theoretical underpinnings to some of this work. It is not clear to me what assumptions we are testing and what we are learning from that we could extrapolate.
Small groups are always a better learning place. In trainings there is a rule called 20/40/80 - one remembers 20 percent of what he hears, 40 percent of what he hears and sees, and 80 percent of what he hear, see and do.
This can be applied to all trainings and education programs in general, to all kind of audiences too.
To Nachiket's point,I think this research is more or less exploratory in nature and application of theory comes in next phase as the RAs pointed to a second stage of this study. Also this is just preliminary result, with more analysis of data, there will be more findings.
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