Stimulating managerial capital in emerging markets : the impact of business and financial literacy for young entrepreneurs

Identifying the determinants of entrepreneurship is an important research and policy goal, especially in emerging market economies where lack of capital and supporting infrastructure often imposes stringent constraints on business growth. This paper studies the impact of a comprehensive business and financial literacy program on firm outcomes of young entrepreneurs in an emerging post-conflict economy, Bosnia and Herzegovina. The authors conduct a randomized control trial and find that while the training program did not influence business survival, it significantly improved business practices, investments, and loan terms for surviving businesses. Entrepreneurs with higher ex-ante financial literacy further exhibited some improvements in business performance and sales.Financial Literacy,Access to Finance,Business in Development,Competitiveness and Competition Policy,Business Environment

Unpacking the causal chain of financial literacy

A growing body of literature examines the causal impact of financial literacy on individual, household, and firm level outcomes. This paper unpacks the mechanism of impact by focusing on the first link in the causal chain. Specifically, it studies the experimental impact of financial literacy on three distinct dimensions of financial knowledge. The analysis finds that financial literacy does not immediately enable individuals to discern costs and rewards that require high numeracy skills, but it does significantly improve basic awareness of financial choices and attitudes toward financial decisions. Monetary incentives do not induce better performance, suggesting cognitive constraints rather than lack of attention are a key barrier to improving financial knowledge. These results illuminate the strengths and limitations of financial literacy training, which can inform the design and anticipated effects of such programs.Financial Literacy,Education For All,Access&Equity in Basic Education,Access to Finance,Primary Education

Aspirations of Small-scale Entrepreneurs:Evidence from Urban Retailers in Indonesia

Small-scale entrepreneurs are ubiquitous in developing countries, yet very few graduate to become larger businesses. We ask whether such entrepreneurs even aspire to grow, and if so on which dimensions of the business? Among a representative sample of retail shop owners in Jakarta, we find that the average business has strong short- and long-term aspirations for growth in shop size, number of employees, number of customers, and sales. Yet, there is pronounced heterogeneity with more than half the businesses reporting no aspirations for growth in the next 12 months, and 16 percent failing to imagine an ideal business over the long-term. We find that entrepreneurs with low profits, business skills, and agency beliefs, as well as those who are older, female, and less educated have significantly lower aspirations. We also show that aspirations predict future-oriented behaviors such as savings, credit use, business expansion, and innovation, even after controlling for business practices. These results have important implications for the design and targeting of business growth programs and policies

NEGATIVE AFFECTIVITY, CONSCIENTIOUSNESS AND JOB SCOPE (A CASE OF IT AND TELECOM INDUSTRY)

Based on a sample of 350 employees in the telecommunication and telecommunication, we obtained empirical evidence suggesting that while individuals high on conscientiousness tended to react more positively to job scope, individuals high on negative affinity tended to react less positively. Job scope was defined as the extent to which a job required the jobholder to be mentally and physically involved to get it done effectively. Typically, a job characterized by a high job scope would be non-repetitive, would need a great deal of independent thought/action and training, would entail the job holder to keep track of his/her progress, and others. The affirmative results obtained in regard of the moderating roles of personality factors in the present study suggested that job design researchers should further explore individuals’ personality differences in response to job scope

Relationship Between Work-Family Conflict, Job Embeddedness, Workplace Flexibility, and Turnover Intentions

The present study seeks to propose and test a research model that investigates job embeddedness as a mediator and workplace flexibility as a moderator of the effect of family-work conflict on turnover intentions. This study uses a survey method and a structured questionnaire to collect data from 187 nurses working in various hospitals in Islamabad, Pakistan. The results showed that on-the-job embeddedness partially mediated the effect of work-family conflict on nurses\u27 turnover intention. Furthermore, workplace flexibility moderated the relationship between work-family conflict and turnover intention. Management of the hospitals should take decisive steps to establish and maintain a supportive and flexible work environment because such an environment would help nurses to balance their work (family) and family (work) roles and lead to increased job embeddedness. Otherwise, it would be very difficult to retain high performing nurses in the workplace. The current study contributes to the existing knowledge base by testing job embeddedness as a mediator and workplace flexibility as a moderator of the impact of work-family conflict on turnover intentions of nurses

Liability Structure in Small-Scale Finance: Evidence from a Natural Experiment

Microfinance, the provision of small individual and business loans, has witnessed dramatic growth, reaching over 150 million borrowers worldwide. Much of its success has been attributed to overcoming the challenges of information asymmetries in uncollateralized lending. Yet, very little is known about the optimal contract structure of such loans―there is substantial variation across lenders, even within a particular setting. This paper exploits a plausibly exogenous change in the liability structure offered by a microfinance program in India, which shifted from individual to group liability lending. We find evidence that the lending model matters: for the same borrower, required monthly loan installments are 11 percent less likely to be missed under the group liability setting, relative to individual liability. In addition, compulsory savings deposits are 20 percent less likely to be missed under group liability contracts

Local Best Practices for Business Growth

Can best practices of successful business peers influence the efficiency and growth of small-scale enterprises? Does it matter how this information is disseminated? This paper conducts a field experiment among urban retail shop owners in Indonesia to address these research questions. Through extensive baseline quantitative and qualitative assessments, we develop a handbook of local best practices that associates specific business practices with performance and provides detailed implementation guidance informed by exemplary local shop owners. The handbook is distributed to a randomly selected sample of shop owners and is complemented with three experiential learning modules: one group is invited to watch a documentary video on experiences of highly successful peers, another is offered light in-shop assistance on the implementation of the handbook, and a third group is offered both. Eighteen months after the intervention, we find no effect of offering the handbook alone, but significant impact on practice adoption when the handbook is coupled with experiential learning. On business performance we find sizable and significant improvements as well, up to a 35% increase in profits and 16.7% in revenues. The types of practices adopted map these performance improvements to efficiency gains rather than other channels. The analysis suggests these interventions are simple, scalable, and highly cost-effective

Curating Local Knowledge:Experimental Evidence from Small Retailers in Indonesia (Revision of DP 2019-015)

Business practices and performance vary widely across businesses within the same sector. A key outstanding question is why protable practices do not readily diffuse. We conduct a field experiment among urban retailers in Indonesia to study whether alleviating informational and behavioral frictions can facilitate such discussion in a cost-effective manner. Through quantitative and qualitative fieldwork, we curate a handbook that associates locally relevant practices with performance, and provides idiosyncratic implementation guidance informed by exemplary local retailers. We complement this handbook with two light-touch interventions to facilitate behavior change. A subset of retailers is invited to a documentary movie screening featuring the paths to success of exemplary peers. Another subset is offered two 30 minute personal visits by a local facilitator. A third group is offered both. Eighteen months later, we find significant impacts on practice adoption when the handbook is coupled with the two behavioral nudges, and up to a 35% increase in profits and 16.7% increase in sales. These findings suggest both informational and behavioral constraints are at play. The types of practices adopted map the performance improvements to efficiency gains rather than other channels. A simple cost-benefit analysis shows such locally relevant knowledge can be codified and scaled successfully at relatively low cost

Essays on firms, banks and Access to finance

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2006."June 2006."Includes bibliographical references.This thesis is a collection of three empirical essays on firms, banks, and access to finance. Chapter 1 provides evidence that credit subsidies for exports are substantially misallocated towards financially unconstrained firms. Using loan level data for firms and exploiting an exogenous change in loan eligibility, I show that publicly listed firms are financially unconstrained, and are also allocated nearly 44% of all subsidized loans. The opportunity cost of these misallocated funds is significant as even the more productive privately held firms are shown to be financially constrained. Chapter 2 studies the role of banks in the transmission of financial flows to the economy. Exploiting a large and unexpected liquidity upsurge in an emerging economy, the chapter examines changes in bank lending behavior and finds very stark results. Bank lending to firms did not increase despite a substantial drop in the cost of capital. The results suggest that banks may be limited in their ability to extend credit due to severe agency problems. Chapter 3 analyzes changes in firm ownership structure that may be caused by the level and ease of obtaining outside financing.(cont.) I combine a sector-specific financial shock with detailed data on the board of directors of firms and find that private firms that are adversely affected by the financial shock are more likely to have group-affiliated directors take positions on their boards. I also find that private firms that do not get a group director are significantly likely to acquire cross-holdings in other private firms, thus integrating horizontally.by Bilal Husnain Zia.Ph.D