In Simple Words
Opening a brand-new storefront takes weeks of setup before the first customer buys anything. If a landlord demands rent on day one before you even put up a sign, you will give up on opening the shop and just keep selling trinkets on the street corner.
Women borrowing through VFS in Kolkata
- Repayment starts after two weeks
- 2.0% started a business
- Repayment starts after two months
- 2.68 points more started a business
Trial, unadjusted estimate; percentage points. Window spans 30 days before to 180 days after loan receipt. Default also rose.
See source →Research question
Standard microfinance schedules force borrowers to channel capital into existing, short-term operational activities rather than funding the higher start-up risk and gestation lag required to launch net-new commercial enterprises.
Participants
N = 845 female microfinance clients in Kolkata, India.
Study Design
Field RCT measuring new business establishment up to 30 days prior to or 180 days following loan disbursal across baseline and 3-year follow-up surveys.
Results
New business formation was 2.0% among regular contract clients versus 4.58% to 4.68% among grace period clients (a 2.58 to 2.68 percentage point increase, p < 0.05), representing more than double to nearly triple the rate of new venture creation.
Takeaway
Provide 60-day repayment deferrals specifically targeted at microfinance loan applicants seeking seed capital for new business start-ups.
Source and citation
See source →Read alongside the research
Plain-English glossary
Original explanations, informed by the references below. Examples are illustrations, not data from the studies above. The research text stays unchanged.
- Follow-up
Collecting more information about participants later in a study to see what has happened to them. The term can also mean the length of time researchers keep track of them.
ExampleResearchers interview the same workers three months after a programme ends. That later interview is a follow-up.
GET-IT glossary · Follow-up ↗Read more about follow-up →- Baseline
The starting measurements in a study. Researchers use these to compare what participants were like at the start with what happens later.
ExampleBefore a training programme starts, researchers measure workers’ earnings. That first measurement is the baseline.
GET-IT glossary · Baseline characteristics ↗Read more about baseline →- Percentage points
The difference between two percentages.
ExampleA rise from 40% to 50% is 10 percentage points. Relative to the starting value, that is a 25% increase.
Office for National Statistics · Percentages ↗Read more about percentage points →- Randomized controlled trial
A study that uses chance, like drawing lots, to decide who receives each option being compared. Researchers compare the groups’ outcomes to estimate the effect of those options.
ExampleA lottery assigns volunteers to a training programme or a comparison group. Researchers then compare their outcomes.
GET-IT glossary · Randomized study ↗Read more about randomized controlled trial →