Female Microenterprises and the Fly-paper Effect: Evidence from a Randomized Experiment in Ghana

This study uses a randomized experiment in Ghana to test both for differences in returns by gender and differences in returns to capital provided in-kind or cash. It tests the prediction by standard models of investment that credit-constrained firms should grow rapidly when given additional capital, and that how this capital is provided should not affect decisions to invest in the business or consume the capital.

The study randomly gave cash and in-kind grants to male and female owned microenterprises in urban Ghana. Average treatment effects of in-kind grants were large and positive for both men and women, but the gain in profits was almost zero for women with initial profits below the median. Study findings indicate that:

• Capital alone is not enough to grow subsistence enterprises owned by women;
• Only in-kind grants lead to growth in business profits;
• Enterprises owned by men also witness a lower impact of cash but differences between cash and in-kind grants are less robust;
• Difference in the effects of cash and in-kind grants is associated more with a lack of self-control than with external pressure.