Paper Clip: Mixing friendship and business can help

These findings suggest that having a friend present during training can be an important factor in laying out and ultimately achieving business goals.

Published:July 7, 2015 1:32 am

By Authors: Erica Field, Seema Jayachandran, Rohini Pande, Natalia Rigol

Efforts to make low-income woman entrepreneurs in developing countries more successful through business training and counselling have yielded mixed results. Researchers have, therefore, looked for other factors that can impact the success of micro-enterprises. One such factor is peer interaction — but the evidence around peer effects at work has so far been limited.

Study authors worked with Self-Employed Women’s Association (SEWA) Bank, the largest women’s bank in India, to create a two-day business counselling programme for women aged 18-50 who had actively saved or borrowed from the bank between December 2004 and January 2006. The programme, led by bank staff, taught women basic financial literacy and business skills.

More than 400 women were invited to attend the training programme. Half of them also received invitations for a female friend or family member who would support her, and also receive training. After four months, striking differences were seen between the two groups of women.

Although both sets of women were more likely to take out loans than other SEWA clients who weren’t in the programme, the women who were invited without a friend mostly used their loans for home repair largely unrelated to their businesses. Women who were asked to bring a friend along, on the other hand, were more likely to use their loans specifically for business purposes.

Again, women who brought friends reported having a higher volume of business than those who trained alone — and they had specific plans to increase revenues.

Most strikingly, women who were invited to the training with a friend had significantly higher household income and consumption levels four months later, and were less likely to report their occupation as housewife.

These findings suggest that having a friend present during training can be an important factor in laying out and ultimately achieving business goals. Women who trained with a friend set more ambitious goals for themselves. The improvement of business outcomes was especially salient for women in castes or religious groups that impose more restrictions on whether women can move about the community and interact with others unaccompanied.

— ADAPTED FROM AUTHORS’ REPORT IN HARVARD BUSINESS REVIEW

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