The impact of low cost business education:Evidence from a Randomized Controlled Trial in Cape Town

Programme

1. Introduction to Business Bridge:Director Dr Mike Herrington

2. Background to the research project3. Introduction to JPAL:

Laura Poswell: Executive Director4. Results to date5. Meet the Graduates6. Call to action

The Business Bridge Mission

To tackle poverty and unemployment byproviding high quality, relevant,

applicable business education at lowcost on a mass scale

?

The missing middle

SmallStunted Growth (e.g. sales)Lack Prosperity (e.g. profits)

• Institutions (e.g. property rights)

• Information (e.g. registration)

• Human Capital (e.g. health)

• Financial Capital (e.g. credit)

• Managerial Capital (e.g. financial skills)

Micro-level solutionsfor Small Firms:

- Finance focused- Evidence mixed

(see Acemoglu et al 2005; Beck et al 2006; Bloom et al 2010; Bruhn et al 2010; Duflo et al 2012; Hsieh & Olken 2014;Jensen 1998; Karlan & Appel 2012; Nichter et al 1999; Tybout 2000; Sachs 2006)

Marketing Skills?

Factors affecting growth

Policy Makers…Researchers…Experts…

Muhammad Yunus,Nobel Laureate:“[The poor] do not need us to teachthem how to survive; they alreadyknow. So rather than waste our timeteaching them new skills, we try tomake maximum use of their existingskills. Giving the poor access tocredit allows them to immediatelyput into practice the skills theyalready know.” (1999)

The doubters…

Addressing the Need

Major lack ofManagerial Capital –the management offactors of production

1. High quality coursematerials

2. Face-to-face tutoring bybusiness professionals

3. A network of partnerorganisations that providewider enterprisedevelopment supportservices

The Need Our three-part model

Our Stakeholders

FACILITATORS

SMMEsPARTNERS

A Representative Sample

Beauty Shops12%

Restaurants11%

Family Clothing(reseller)

5%

Building/Construction5%

Grocery stores4%

Electrical repair4% Child care

3%Cleaning,landscaping

3%Misc. apparel

2%Misc. trade

2%

Misc. apparel(reseller)

2%Misc. metal products

2%

Barber shops2%

Outerwear (uniforms)2%

Computer/dataprocessing

2%

OTHER39%

15 industries account for 60% of the sample

Core offering: Training

Course Offerings Finance; Sales & Marketing

Time Frame Four hours once a week for eight weeks (per course)

Medium ofInstruction

Face-to-face tutoring by highly experienced business professionalson a pro-bono basis

Location Local venue provided free of charge or at minimal cost bystrategic partner

Cost toParticipant R150 per entrepreneur per course as a ‘commitment fee’

Learning That’s Relevant

• Module 2: Identifycustomer needs

• Module 4: Questioningskillfully

• Module 7: Deliveringon product/servicepromises

• Module 1: Financialjargon

• Module 5: Analysingbusiness and financialdecisions

• Module 8: Fundingyour growth

Making Sales Managing Money

Laura PoswellExecutive Director for JPAL Africa

What is J-PAL?

• The Abdul Latif Jameel Poverty Action Lab (J-PAL) was established in 2003as a research centre at the Economics Department at the MassachusettsInstitute of Technology (MIT).

• J-PAL is a global network of researchers who use randomized evaluationsto answer critical policy questions in the fight against poverty.

• 108 affiliated professors, 573 ongoing or completed evaluations in 56countries.

• J-PAL’s mission is to reduce poverty by ensuring that policy is informed byscientific evidence. We do this through three main activities:

J-PAL core activities

J-PAL offices

J-PAL and Business Bridge

• J-PAL identified the Business Bridge programme as a key interventionwhich could potentially reduce unemployment and poverty in SouthAfrica.

• J-PAL and Business Bridge worked closely together to design the mostrigorous impact evaluation of the training program.

• Once the training started, J-PAL conducted independent high quality datacollection with the business owners in the study sample.

• J-PAL organised and supervised three rounds of data collection: baseline,midline and endline.

• The first preliminary results compiled by the researchers look promisingand we are now eager to turn those results into recommendations forpolicy makers.

“Business Skills” Training for small firms

Prior Studies(see McKenzie & Woodruff 2012)

Our Study

Sample: heterogeneous homogeneous

Intervention: weaker stronger

Functional focus: general specific

Measurement: paper electronic

Innovations in our research

The Research in NumbersSample size 832 Entrepreneurs

Registration 5 training locations: urban, suburban and township areas

Data Collection 20+ researchers collected data at the business locations using a newelectronic tool

The “typical”Business BridgeEntrepreneur

1.50 employeesR13,750 monthly salesR3,840 monthly profits38% registered5 years operating53 hours/week6% accessed loans39 years46% female62% graduated secondary school98% black/colored

Time

Perf

orm

ance

(e.

g. s

ales

)

Effect

Intervention

The RCT ExplainedAn Illustrative Example:

Marketing: 69% Finance: 39%

Increasing Sales

Raising ProfitsMarketing: 86% Finance: 75%

Marketing: 9.7% Finance: 12.7%

Improving Survival Rates

Marketing: 61.9% Finance: 32.9%

Generating Employment

Marketing growth focusutilization: changing sales staff incentivesallocation: planning product line adjustments

Finance efficiency focusutilization: tracking the cost of goodsallocation: separating personal and business

expenditures

Skills Do Improve Performance

Meet the graduates

Melton Oppelt : Owner, MP Transport CC

Thumi Kgaphole : Owner, Bob Masters Salon and Academy

Our GoalsDeliver 1500 course places to over 1000 entrepreneurs by May 2015Replicate the model in new locations by Q3 2015

Our Partners

Bringing Research to Reality

Business Support Network

What? Fortnightly networking sessions

Where? Every community in which we deliver training

Who? Business Bridge graduates and community basedentrepreneurs

Why?

1. Continued interaction with graduates2. Increase the flow of business and strengthen

communities3. Access point for partners and ED opportunities4. Further data collection

How?

Building Bridges to Opportunity

Entrepreneurs

Communities

New markets, ideasand knowledge

ED Partners

Corporate Partner

Get involved!

1. Facilitators2. Long term partnersCorporateDonorsEnterprise Development

The next ‘Train the Trainer’What? Facilitator training session

Where? TBD

When? Friday 10th October, 1-5pm

Who? Local business professionals with sales, finance orentrepreneurial experience

Why?

1. Share your business skills2. Develop your facilitation skills3. Gain knowledge of the micro-economy4. Have fun!

How? tparry@thebusinessbridge.org