Standard business training programs aim to boost the incomes of the millions of self-employed business owners in developing countries by teaching basic financial and marketing practices, yet the impacts of such programs are mixed. The hypothesis tested is whether a psychology-based personal initiative training approach, which teaches a proactive mindset and focuses on entrepreneurial behaviors, could have more success. A randomized controlled trial in Togo assigned microenterprise owners to a control group (n = 500), a leading business training program (n = 500), or a personal initiative training program (n = 500). Four follow-up surveys tracked outcomes for firms over 2 years and showed that personal initiative training increased firm profits by 30%, compared with a statistically insignificant 11% for traditional training. The training is cost-effective, paying for itself within 1 year.
Business survival, Monthly sales and profits, business practices, personal initiative, capital and labour inputs, diversified product line, access to finance index
Both training programmes increase adoption of good basic business practices by about 6 percentage points, despite the personal initiative training not explicitly focusing on teaching those. Both training programmes increase personal initiative, despite the traditional business training not focusing on that. However, the impact is almost twice as large from the personal initiative training. Both training programs led to firms using more inputs, engaging more in innovation activities and improving access to credit. But these impacts were significantly larger for firms offered the personal initiative training. In particular, the personal initiative training led firms to introduce more new products and increased the likelihood that these new products were their own idea and new for the neighbourhood (rather than just copied from others). Neither training had an impact on firm survival. The personal initiative training has large positive effects on monthly sales (17% increase) and profits (30% increase) compared to firms not receiving any training, while the traditional training does not. The positive effects of the personal initiative training on sales and profits occur across businesses of all sizes, and for both women and men. Given its large and sustained effects on profits, the personal initiative training pays back its cost within approximately one year. Return on investment is estimated to range from 140% to 393% over a ten-year period.