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Good practice Imported

Consulting and Capital for Microenterprise Tailors — Accra's Randomised Test of Business Advice vs. Cash

Ghana · Accra · See the Ghana profile · See the Accra profile

Evidence: Randomised controlled trial Top 98% 33/100 · Ask Evidence Copilot about this practice

A randomised trial gave 160 Accra tailoring microenterprises free Ernst & Young consulting, a cash grant, both, or neither. All arms changed business practices, but none raised average profits — a cautionary result for consulting-led SME growth support.

160 firms
Tailoring businesses randomised (2008)
36 firms
Firms in the cash-grant-only group
41 firms
Firms in the consulting-only group
36 firms
Firms in the consulting-plus-cash group
200 Ghana cedis (~US$133)
Cash grant amount
1 year
Duration of free consulting

Details

Maturity
Pilot
Promoter
Innovations for Poverty Action & Ernst & Young Ghana
Period
2008–2011
Keywords
SME productivity, business consulting, informal enterprise, tailoring

Context

Innovations for Poverty Action (IPA) partnered with Ernst & Young Ghana to test whether management consulting, working capital, or both could improve the performance of urban microenterprises in Accra.

Objectives

Test the separate and combined effects of free management consulting and a cash grant on tailoring microenterprises' business practices and profits.

Activities

In 2008, researchers randomised 160 Accra tailoring businesses into four groups: a cash grant of 200 Ghana cedis (about US$133, roughly doubling average working capital); one year of free management consulting from Ernst & Young delivered through IPA; both; or a control group receiving neither.

Results

All three treatment arms produced their intended short-term effects - participants changed record-keeping and management practices and increased investment - but none translated into higher average profits than the control group; each treatment arm's profits dipped below the control group's at some point, and by the final follow-up round consulting-treated tailors had reverted to their prior practices while the cash-only group had scaled back its added investment.

Conclusions

Informational nudges and capital injections alone were not sufficient to durably change outcomes in this setting - a caution against assuming consulting-style interventions transfer automatically to informal microenterprises.

Implementation
Indicative cost
Low (< €50k) — Grant of 200 Ghana cedis (~US$133) per firm in cash arms; one year of pro bono Ernst & Young consulting in consulting arms; 160-firm total sample.
Time to results
Medium (1–3 years) — Randomised in 2008 with follow-up rounds tracking outcomes through roughly 2011.
Staffing & skills
Ernst & Young consultants delivering one year of free management consulting, IPA field team for delivery/coordination and randomisation, Academic research team (Karlan, Knight, Udry) for design and evaluation

Conditions for success

  • Adequate grant size relative to existing working capital (roughly doubling average capital)
  • Sustained consulting engagement over a full year
  • Follow-up measurement across multiple rounds to detect reversion

Common failure modes

  • None of the three treatment arms raised average profits above control by study end
  • Consulting-treated firms reverted to prior practices and cash-only firms scaled back investment by the final follow-up round

Commonly funded by

Philanthropic / foundation funding

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Data sources

Where this practice's information was retrieved from, and when.

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