What’s the Best Way to Teach Entrepreneurship? Assessing the Impact of Different Business Training Approaches
With countless low-income people across the globe running small-scale enterprises, many global development practitioners champion entrepreneurship and business creation as a viable pathway out of poverty. In the last twenty years, this sentiment has sparked a growing movement to support the launch and development of enterprises run by people living in poverty. To fortify the development of these business ventures, a number of organizations have designed training programs that teach business skills, aiming to support people living at the base of the economic pyramid (BoP) in their efforts to build enterprises that provide livelihood incomes.
Developing a BoP BUSINESS TRAINING FRAMEWORK
As MIT D-Lab’s Inclusive Markets Specialist, I work to support the development of programs that spur governments and multinationals to incorporate low-income entrepreneurs into formal economic systems, effectively creating livelihood opportunities for people living in low-resource communities. Inclusive market systems require low-income entrepreneurs to understand how to run their business ventures. That’s why, in January 2017, we launched an MIT D-Lab Practical Impact Alliance working group to answer the question, “What are the most effective methods for teaching business to a BoP population?”
Comprised of staff from 12 non-governmental organizations and multinational corporations, the working group gathered monthly over the course of a year to present and evaluate 10 business-training programs. From this examination, a framework for building BoP business courses emerged. It starts with a user-centric approach of identifying beneficiaries and their desired outcomes, then pairs appropriate instructional approaches with specific skillsets.
FIVE APPROACHES FOR TEACHING BUSINESS TO BOP ENTREPRENEURS
The working group identified five instructional approaches for delivering business training to a BoP population. The approaches, or delivery mechanisms, are varied in terms of monetary resources, time commitment and skills development – and whether or not particular approaches are adept at spurring self-determination or agency enhancement.
Some of the case studies actually blend approaches: For instance, one case study introduced business concepts in the classroom using a rule of thumb approach and then followed up with business coaching. Another case study explored peer-to-peer training, which generally consists of a cohort of three to five participants, requires a relatively small expenditure of US $10,000 – $50,000, and can be completed in more or less eight months. While this approach provides only an adequate level of skill development and agency enhancement, it has shown itself to be a good way to develop business skills in hard-to-reach regions and refugee camps, where a group of local trainers can be instructed to offer modules to a handful of entrepreneurs in training at one time. In another example, a business co-creation approach teaches a cohort of up to 25 students over a period of nine months to two years, and can cost US $100,000 – $250,000. While this approach is more costly, it is particularly successful at creating an entrepreneurial mindset and igniting self-determination.
The following descriptions include links to the relevant case studies on each approach:
- RULE OF THUMB
Beneficiaries learn simple, practical rules for managing their businesses.
Case Study: Danone Ecosystem Fund (Kiteiras)
- PEER-TO-PEER TRAINING
Peers from within the beneficiary community are taught to provide business training to local BoP entrepreneurs.
Beneficiaries learn business skills as they propose, design, launch and build their own business ventures that address a particular problem in their community.
Case Study: Dare to Innovate
- LEVERAGING TECHNOLOGY
Beneficiaries are provided with business-training modules on iPads or smart phones.
Case Study: Fundación Capital
- COACHING OR MENTORING
Beneficiaries receive one-on-one training from a business coach or mentor.
Case Study: MOVE
SKILLSETS FOR TEACHING BUSINESS TO BOP ENTREPRENEURS
Another element of the BoP Business Training framework considers the skillsets organizations may choose to include in their business-training curriculum. Over the course of the working group, four types of skills emerged as the primary building blocks for teaching business to BoP entrepreneurs: agency enhancement, entrepreneurship, marketing and sales, and financial planning. Surprisingly, the tools that consistently increased revenue were not hard skills such as pricing and marketing, but agency-based empowerment trainings focused on personal initiative and self-determination. A randomized control trial (RCT) conducted by the Leuphana Universität Lüneburg showed that participants receiving personal-initiative training saw their profits increase by 30 percent and sales by 17 percent – more than that of participants receiving the World Bank’s renowned Business Edge management training program, a traditional skills-based model.
Our framework for building BoP business courses pairs a user-centric approach of identifying beneficiaries and their desired outcomes with appropriate instructional methods and specific skillsets. In considering this framework, three cases from the working group emerged as particularly instructive for practitioners. We have included a short summary of each below.
Agency Enhancement: Global Alliance for Clean Cookstoves
Approach: Classroom setting with optional personal development coaching
Skillset: Agency enhancement, marketing and sales, financial planning
Population: Adult women (also adult men and adapted for youth)
Level of Education: All literacy levels
With Johns Hopkins University and Visionaria Network, the Global Alliance for Clean Cookstoves developed a comprehensive curriculum called the Empowered Entrepreneur Training Handbook that builds key business, empowerment and leadership skills for women micro- and small entrepreneurs in the off-grid energy sector.
The guide’s most notable feature is the personal development-training component that focuses on building “agency-based empowerment.” The training has been tested using an RCT, which showed that agency-based empowerment training is more effective than traditional business management training at enhancing business and personal growth. A global rollout of the Empowered Entrepreneur Training Handbook certification program to more than 20 clean energy organizations and 60 trainers across Africa and Asia demonstrated positive impacts on sales and retention.
Entrepreneurship Training: Dare to Innovate
Skillset: Entrepreneurship, marketing and sales
Population: Youth ages 18-35
Level of Education: At least a high school education
Dare to Innovate uses entrepreneurship training to teach teams of young people in West Africa how to generate and develop their own ideas for launching enterprises. DTI’s program begins with a 10-day intensive accelerator in which participants identify a problem in their community and apply a market-based solution. Directly after participating in the accelerator, participants engage in six weeks of prototyping in their communities and then return for a business pitch competition. The best ideas are funded by DTI and are offered additional entrepreneurship training as they launch and build their businesses. From 2014 to 2018, Dare to Innovate trained 5,000 youth, helped co-create 52 youth enterprises (which are projected to create 340 jobs by the end of 2018), and mobilized US $220,000 in seed fund investment.
Financial Management Training: International Labor Organization
Approach: Peer-to-peer learning
Skillset: Agency enhancement, marketing and sales, financial management
Population: Vulnerable and marginalized communities
Level of Education: Low literacy as well as secondary school
The ILO created Community-Based Enterprise Development to target underserved, marginalized communities in remote settings and refugee camps. Carried out without external trainers or resources, C-BED relies on action-based group learning best suited to contexts with low institutional capacity and limited resources. Participants work together in small groups, sharing existing knowledge and experiences to solve problems, helping each other understand formal business concepts, and developing stronger skills for business improvement. The ILO’s curriculum is comprised of two core C-BED training packages, one for aspiring entrepreneurs and another for small business operators. To date, more than 60 organizations in 14 countries are using C-BED across Asia and the Pacific, including government ministries, employers’ organizations, trade unions, UN agencies, NGOs, the private sector and academic institutions.
At MIT D-Lab, we are currently using this framework to further develop D-Lab’s Inclusive Markets co-designed business training curriculum, which we utilize in projects that aim to incorporate the informal sector into formal market systems. For example, in Ghana, we have offered our Creative Capacity Building and Creative Capacity Building for Business trainings to 40 waste pickers to provide opportunities for earning a living wage. We are now conducting research to understand the extent to which these training programs spark self-determination and agency enhancement. In addition, we are currently adapting D-Lab’s training methodology to enhance the livelihoods of other informal workers, including gold miners and smallholder farmers. We believe these efforts, along with the work of other like-minded programs around the world, will go a long way toward providing entrepreneurs at the BoP the skills they’ll need to work their way toward a sustainable livelihood.
You can learn more in the MIT D-Lab Practical Impact Alliance Practitioner’s Guide, A Tailored Approach to BoP Business Training Programs.
Libby McDonald teaches D-Lab: Gender and D-Lab: New Economies at MIT D-Lab.
Photo courtesy of MIT D-Lab.