In low- and middle-income countries (LMICs), regular salaried employment is often scarce and self-employment and small-scale businesses are important sources of job creation. Encouraging entrepreneurship is therefore a promising way to develop sustainable livelihoods and, ultimately, reduce unemployment and poverty. In recognition of this, interventions promoting entrepreneurship are increasingly being implemented in developing countries. These entrepreneurship programmes commonly include technical, business or financial skills training, financial support in the form of microcredit and/or mentoring, and counselling services. The effects of these programmes are not clear. Thus, this review aims to uncover the evidence on the effects of entrepreneurship programmes in low- and middle-income countries.
The authors aim to determine the effectiveness of entrepreneurship programmes as a tool to improve the livelihoods of people in low- and middle-income countries and investigate how effects vary by programme design and implementation features.
The authors included impact evaluations using experimental or quasi-experimental designs assessing the effects of interventions that aimed to promote entrepreneurial activities among current or potential entrepreneurs in developing countries over the past 10 years. The authors broadly categorised included intervention types as training, financing, counselling or a combination of these, and they gathered information on six outcomes of interest: labour-market activities, labour-market income, financial behaviour, business knowledge and practice, business performance, and attitudes. The authors included published studies and working papers that had been made available in the public domain by the end of March 2012. The authors undertook citation tracking of relevant studies and searched databases, including Google Scholar and IDEAS, to find recent working papers, focusing on working papers from the National Bureau of Economic Research, World Bank Policy Research Working Paper Series and IZA. They used meta-regression to analyse how differences in the magnitude and significance of estimated impacts varied by intervention and study characteristics.
Headline Findings: a summary statement
Entrepreneurship programmes have a strong positive effect on youths, particularly on labour-market activities and business-practice outcomes, and improve business knowledge and practice, particularly for existing entrepreneurs. However, there is no evidence that this translates into improved business performance and increased income.
The authors included 37 impact-evaluation studies in the review. The studies cover 25 countries across sub-Saharan Africa (nine studies), South Asia (10 studies), Latin America and the Caribbean (10 studies), East Asia and the Pacific (four studies), Eastern Europe (two studies) and North Africa (two studies). Two-thirds of the interventions evaluated came from low-income or lower-middle-income countries. Of the estimates, 80 percent were based on experimental interventions. The most commonly measured outcomes were labour-market income, profits and labour-market activities.
Implications for policy and practice
Entrepreneurship programmes have a positive impact on business practices and labour-market activity, though different combinations of intervention components matter differently across types of beneficiaries and contexts, suggesting that interventions need to be customised to achieve the desired outcomes.The authors explored variation in programme effects by a range of potential determinants of success. They found the following results.
- Entrepreneurship programmes are more likely to have a positive impact on youth, those in higher education and the urban population, while microcredit clients experience fewer benefits than the general population.
- Women appear to benefit most from financing support. They do not significantly benefit from entrepreneurship programmes, other than some improvements in empowerment-related outcomes.
- Existing entrepreneurs benefit from business training by improving their business knowledge, but this does not immediately translate into better business performance.
- Private-sector delivery is strongly linked to programme success. Programmes delivered by the private sector and non-governmental organisations are more likely to be successful than those delivered by banks or microfinance institutions.
- Training programmes are associated with greater impact in the short term, while financing programmes seem to work better in the longer term.
- Among programmes with a training component, vocational training is most likely to lead to programme success, particularly when combined with either counselling or financing services. General business training, alone or in combination with mentoring/counselling, is more effective than financial training, which offers the least benefits. Adding financing support to business training does not seem to improve effectiveness.
- Among financing interventions, cash and in-kind transfer programmes with training components have greater impacts than microcredit. Adding training components to microfinance is not associated with greater impact.
- Financing alone can improve business performance, while training alone can improve business knowledge and practice. A combination of the two is most effective in promoting labour-market outcomes.
Implications for further research
The authors do not make recommendations for future research.