Female entrepreneurs face myriad challenges, particularly in developing countries, but business training programs that target women individually may be missing the mark.  A new research study co-authored by Rohini Pande, Mohammed Kamal Professor of Public Policy at Harvard Kennedy School (HKS), finds that training programs that target women along with their peers is an even more effective strategy for helping them succeed in business. 

Friendship at Work: Can Peer Effects Catalyze Female Entrepreneurship?” is published in the May edition of the American Economic Journal.

“A common policy response in low-income settings, where female educational attainment is relatively low, is to prescribe business training and counseling programs,” the authors write. “Yet a growing body of experimental evidence suggests that simple deficits in business or accounting know-how are not at the heart of the gender gap in performance.” 

The authors designed a field experiment to provide a short financial literacy counseling and training program for a randomly selected group of clients from India’s largest women’s bank.  Among those invited, half were randomly selected to be invited to bring a friend along with them, while the others were not.  

Four months after the training, the researchers found that the randomly selected group of women targeted by the training were more likely than those who weren’t so targeted to take out a loan from the bank. 

“This higher loan incidence may, however, simply reflect greater familiarity with bank products or confidence that their loan application would be successful,” the authors write. “More revealing are the substantial differences in borrowing behavior across those invited to attend alone and those invited to attend with a friend: Only women invited with a friend have a higher propensity to borrow, and they almost exclusively used the marginal loans for business purposes.” 

Those women who attended the program with a friend were also more likely to report changes in business behavior, and higher household income and expenditures.  They were also less likely to report their occupations as housewives. 

“The observed benefits from training with a peer could operate through multiple mechanisms. The presence of peers may influence a woman's classroom experience -- she may exhibit greater business confidence in a more supportive environment, or may feel more competitive pressure when among peers to absorb the material covered. Equally, having a friend as a training partner may strengthen the social network that a woman relies on for support after the training is over,” the authors conclude. 

The research study is co-authored by Erica Field, Duke University, Seema Jayachandran, Northwestern University, and Natalia Rigol, MIT. 

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