Grants vs. Loans: Mapping Investment Decisions into Business Outcomes

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 11.12.2018, 12:15 - 13:30


Presentation by 

Adam Osman (University of Illinois at Urbana-Champaign)


While the return to capital for microenterprises has been shown to be high, studies that aim to relieve capital constraints with microloans have found modest impacts. We explore potential explanations for this puzzle by implementing a large scale field experiment that randomizes the type of capital support provided to new businesses. Individuals who applied for a loan were randomized into four groups: microloans, cash grants, in-kind grants and a control group who received no support. Estimates suggest that while grants lead to better business outcomes relative to loans, heterogeneity in returns to capital matter more than the form the capital is provided in.

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