Targeted Capital Asset Spurt
RCTClinical Trial
Microentrepreneurs often express specific asset purchase goals (such as acquiring machinery or inventory) that remain unfulfilled due to binding credit and cash constraints. Receiving a cash grant triggers an immediate surge in targeted goal investments, but this investment flow dissipates rapidly if the new assets do not generate higher ongoing business income.
Picture this
Imagine a tailor who has long dreamed of buying an electric sewing machine but never has spare cash. When given a cash gift, the tailor immediately goes out and buys the exact machine envisioned; however, if the new machine does not bring in extra paid orders, the tailor cannot afford to buy any more equipment in the following years.
What the evidence says
At two months post-grant (Round 3), capital grant recipients spent 179.3 GH¢ more than the control group on their baseline-stated target investments (p < 0.10) and showed a net asset/savings financial flow increase of 326.2 GH¢ at Round 6 (p < 0.01). By Round 8 (two years post-baseline), new investment flows turned negative (-13.70 GH¢ for capital only, -64.92 GH¢ for combined, p > 0.10).
- Who was studied
- N = 154 urban tailors and seamstresses in Accra, Ghana (75 receiving capital grants of 200 GH¢).
- How
- Randomized Controlled Trial measuring category-specific investment flows at 2 months (Round 3), 1 year (Round 6), and 2 years (Round 8) post-grant.
What to do
Evaluate liquidity constraint interventions by distinguishing initial asset acquisition spurts from self-sustaining long-term investment flows funded by business earnings.
From the source
"In column 1, we see that the capital grant group invested an average of 179 cedis more than the control group in Round 3 (about two months after the grants)... However, a year later (Round 8, Column 2) the effect disappears."
8dfcee5c-2a63-4460-a220-837509002b85-Consulting and Capital Experiments with Microenterprise Tailors in Ghana.pdf