The impact of entrepreneurship training and credit on the labour market outcomes of disadvantaged young people

ABSTRACT

This paper estimates the impact of a program providing classroom and on-the-job entrepreneurship training followed by the provision of a loan to disadvantaged youth. We find that the program increases employment by seven percentage points and income by 21 per cent. The impact is larger for women than men. Furthermore, the results demonstrate an increase in the propensity to save by 17 percentage points with an increase in both the amount of loan taken and outstanding. Nevertheless, the effect of the training component of the program shows no statistically significant impact on income and hours worked. However, the additional impact of the loan component is notable, increasing hours worked as well as earnings.

KEYWORDS:

• Entrepreneurship
• small business
• training
• credit

Acknowledgments

We would like to thank Ms Tasmiah Tabassum Rahman, Associate Director, Skills Development Programme, BRAC, and Mr. Joydeep Sinha Roy, Deputy Country Director, BRAC International, for their insightful suggestions and comments. Further, we thank BRAC and its major donors for funding this study through their Strategic Partnership Arrangement. Finally, we express our gratitude to Dr Imran Matin, Executive Director, BIGD, for his valuable feedback and suggestions.

Disclosure statement

No potential conflict of interest was reported by the authors.

Data availability statement

If a reasonable request is made, the data used for the analysis will be available from the corresponding author.

Notes

1 These studies are Acevedo et al. (2017); Alzúa, Cruces, and Lopez (2016); Attanasio, Kugler, and Meghir (2011); Attanasio et al. (2017); Card et al. (2011); Cho et al. (2013); Díaz and Rosas (2016); Hirshleifer et al. (2016); Honorati (2015); Ibarraran et al. (2014); Ibarrarán et al. (2015); and Maitra and Mani (2017).

2 He also finds that the studies that carried out formal tests for gender equality (in terms of impact) either depict a similar impact for both or a significantly higher impact for men. Acevedo et al. (2017) explain that employment expectations of men increase despite learning little from the program, rendering them unemployed – resulting from a mismatch between expectations and labour market opportunity. However, training enhances skills and expectations for women – consequently, they observe a positive impact on their employment in the short run. This is vindicated by the findings of Attanasio et al. (2017), which show significant effects on women's employment but not quite so for men, even though they carried out no formal test for difference in impact in terms of gender.

3 The program staff monitor and advise the young people, while BRAC's microfinance staff follow-up on loan issues. A record book is provided to the young people to keep daily business records, which are monitored by the program staff.

4 BRAC has been implementing the STAR program since 2012 to help school dropout adolescents (aged 14–18 years) from poor households. The intervention provides on-the-job training under Master Crafts Persons (MCPs) and classroom training on technical skills (mobile phone servicing, tailoring, fridge, or air conditioner repairs, beautician services, graphic designing, aluminium manufacturing, carpentry and more) for six months. A good deal of evidence is available on the impact evaluation of the STAR program (Bhattacharjee and Kamruzzaman 2016; Das 2021; Rahman et al. 2017; Rahman et al. 2018).

5 Those who met all the eligibility criteria of the PROMISE program were finally selected, whereas those who met most of them, but not all, made up the near-eligible list.

6 However, administrative information on eight participants (four from each cohort) and 17 non-participants (four from 2017 and 13 from the 2018 cohort) is not available, and the resultant combination is 478 participants and 471 non-participants for propensity score matching.

7 These characteristics were used to match propensity scores.

8 Descriptions of each of these cases have been given in the notes under Table A2.