Estimating the Impacts of a Microfranchising Intervention

University Of Maryland, College Park, College Park MD

Investigators

Abstract

Estimating the Impacts of a Microfranchising Intervention Abstract Integrating youth into the formal labor market is a major challenge facing developing nations. High levels of unemployment, especially among young adults, have led policymakers to advocate credit programs aimed at promoting entrepreneurship. However, evidence on the overall impacts of such programs has been decidedly mixed, particularly among women. In light of this evidence, we are conducting a randomized impact evaluation of a new policy intervention: microfranchising. The evaluation will measure the impacts of a microfranchising intervention designed specifically for young women. Microfranchising, which connects unemployed participants with businesses via small-scale, multi-person franchises, is a recent policy innovation whose efficacy has not yet been convincingly demonstrated. By eliminating the need to develop a novel business model, but leaving participants to manage their own time and entrepreneurial effort, microfranchising strikes a middle ground between full entrepreneurship and conventional salaried employment. Conceptually, a microfranchise has features in common with both a formal sector job and self-employment: while microfranchisees do not need to devise business models of their own, they work with very little managerial supervision and considerable latitude for creativity. The proposed project will evaluate the second wave of the Girls Empowered by Microfranchise (GEM) Project. The evaluation estimates the impact of the microfranchising program on young women's labor supply, income and expenditures, savings, empowerment and self-actualization, and overall well-being. A randomized design compares the microfranchising program to both the control group which receives no intervention and the treatment. Random assignment of applicants to treatment will generate unconfounded estimates of the impact of the program on girls in the treatment group. To explore potential spillovers, the baseline data collection will include detailed questions on local friendships which allow the PIs to map each girl's social network, and determine the number of friends in the program who were randomly assigned to the treatment group(s). The randomized design allows the PIs to credibly estimate the impact of the microfranchising program on participants, generating cleaner evidence of program effects than a non-experimental study could provide. The design also allows for the estimation of the indirect effects of the program on pre-existing businesses within the treated sectors. Providing increasing numbers of unemployed and underemployed youth with viable income-generation strategies is a pressing policy priority, particularly in light of the perceived failure of microfinance to live up to its promise as a radical tool for transforming the lives of the poor through entrepreneurship. Microfranchising provides a potential alternative to microfinance which relaxes the need to develop a new business model before starting a business. Thus, the first ever impact evaluation of a randomized microfranchising intervention is likely to be of substantial interest to policymakers and development professionals. Yet, no rigorous evaluation of a microfranchising program exists. As a result, this research is likely to have broad policy impacts.