Cash for entrepreneurs boosts jobs in Nigeria
Allocating grants to entrepreneurs may be the best way to create jobs in the developing world, according to a study from the World Bank.
The study draws on evidence from a business plan competition organised by the Nigerian government in 2011, which awarded an average of US$50,000 to 1,200 entrepreneurs, over half of whom were chosen at random. The competition was open to both existing businesses and new start-ups.
Three years on, the study found that new firm applicant winners were 37 percentage points more likely than the control group to be operating a business and 23 percentage points more likely to have a firm with ten or more workers. Existing firm winners were 20 percentage points more likely to have survived, and 21 percentage points more likely to have a firm with 10 or more workers.
The author of the study, World Bank economist David McKenzie, writes that: “Together the 1,200 winners are estimated to have generated 7,000 more jobs than the control group, are innovating more, and are earning higher sales and profits.”
The World Bank is currently supporting similar programs in other African countries.
IZA World of Labor author Yoonyoung Cho has written about entrepreneurship for the poor in developing countries. She writes that: “Combining training and financing seems to be more effective in promoting labor market activities than providing only training or only financing. Providing business training can help small-scale entrepreneurs set up businesses and improve business practices, while providing customized support and follow-up services seems to improve the effectiveness of such programs.”
Read more on this story at Quartz. The World Bank working paper can be found here.
Related articles:
Entrepreneurship for the poor in developing countries by Yoonyoung Cho
Entrepreneurs and their impact on jobs and economic growth by Alexander S. Kritikos
Find more IZA World of Labor articles on entrepreneurship here