Stimulating Microenterprise Growth: Results from a Loans, Grants and Training Experiment in Uganda

This paper presents the results of a randomized experiment in Uganda designed to explore the constraints facing micro and small enterprises. The experiment involved selecting a group of interested individuals from a pool of business owners who were looking to expand their enterprises. These individuals were randomly provided with loans, cash grants, business skills training or a combination of these programs. Updates were noted quarterly to determine the short-run effects on business and household incomes. Key findings include:

• Six and nine months after the interventions, men with access to loans with training report 54% greater profits. This effect increases slightly over time and is driven by men with higher baseline profits and ability;
• Loan-only intervention had some initial impact, but this is gone by the nine month follow-up;
• No impacts have been observed from the unconditional grant interventions;
• None of the interventions had any effect on women;
• Results suggest that highly motivated and skilled male-owned microenterprises can grow through finance, but the current finance model does not work for female-owned enterprises.