Is There a Cost-Effective Means of Training Microenterprises? - Research Findings and Cost-Benefit Analysis

Jul 19, 2026

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Despite billions spent by policy institutions and researchers, most programs aimed at improving managerial skills among microenterprises fail cost-effectively. This short paper evaluates a mentorship program for Kenyan microenterprises using a randomized controlled trial and a detailed cost-benefit analysis. For each dollar spent on treated firms, average profit rises by 1.63 USD, driven by both stronger program impact and lower implementation costs. The study compares mentorship with broader supply-side interventions and identifies where mentorship outperforms classroom training.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages5

Reading Time13 min

Abstract

Background and Motivation

Experimental Design and Treatments

Mentorship vs Classroom Training vs Control

Cost-Benefit Analysis

Treatment Effects on Weekly Profit

Comparison With Supply-Side Literature

Pub lic Disclosure Authorized Pub lic Disclosure Authorized The World Bank Economic Review, 34(Supplement), 2020, S63–S67 doi: 10.1093/wber/lhz031 Supplementary Article Is There a Cost-Effective Means of Training Microenterprises? Wyatt Brooks, Kevin Donovan, and Terence R. Johnson Abstract Despite billions of dollars spent by policy institutions and academics, very few programs designed to increase managerial skills among microenterprises are cost-effective. This short paper highlights a mentorship program designed to provide managerial skills to Kenyan microenterprises, and it provides a detailed cost-benefit analysis. For each dollar spent on a treated firm, average profit increases by 1.63 USD; the result stems from both a higher program impact and lower cost relative to existing training programs. Motivated by this increased cost-effectiveness, the study then compares the program to the large literature focusing on “supply-side” interventions designed to increase managerial capacity in small firms, and it highlights particular margins on which mentorship improves on classroom training and also where training should focus. JEL classification: D83, J16, L26, O14 Keywords: Microenterprise, training, mentor, cost-effectiveness All over the developing world, microenterprise operation is a dominant form of employment, especially among the most vulnerable members of society. These businesses tend to operate at a small scale, with few workers and little inventory, and generate low levels of profit. Recent work has highlighted the lack of managerial skills as an important constraint to microenterprise growth (Bloom and Van Reenen 2007; Bruhn, Karlan, and Schoar 2010) . In response, business training has become one of the most common forms of microenterprise support, with substantial resources devoted from both policy makers and governments. However, in a review of recent evaluations, McKenzie and Woodruff (2014) find that almost none have changed microenterprise profit. In fact, most cannot pass a simple cost-benefit test (Blattman and Ralston 2015) . This result is driven by both costs and benefits. First, training is expensive, with costs in some programs over $100 per student. This implies a high risk to the implementing agency: developing and implementing a training program is an expensive proposition, without any guarantee of results. Second, the majority of these programs have not been able to identify any statistically significant changes in microenterprise profitability, independent of the training price. This short paper conducts a cost-benefit analysis of a new training scheme (“mentorship”) implemented in a randomized controlled trial in Dandora, Kenya. The study randomized young, female microenterprise owners into three groups: a mentorship program in which each owner was paired with a more Wyatt Brooks, University of Notre Dame; his email address [is wbrooks@nd.edu. Kevin Donovan](is wbrooks@nd.edu. Kevin Donovan) (corresponding author) Yale University his email address [is kevin.donovan@yale.edu. Terence R. Johnson](is kevin.donovan@yale.edu. Terence R. Johnson), University of Notre Dame; his email address is[tjohns20@nd.edu](tjohns20@nd.edu). © The Author(s) 2019 . Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / THE WORLD BANK. All rights reserved. For permissions, please e-mail: [journals.permissions@oup.com](journals.permissions@oup.com) Downloaded from [https://academic.oup.com/wber/article/34/Supplement_1/S63/5685406 by guest on 23 June 2021](https://academic.oup.com/wber/article/34/Supplement_1/S63/5685406 by guest on 23 June 2021) Table 1. Treatment Effect on Weekly Profit | | Pooled treatment effect (USD) | Annualized effect (USD) | | --- | --- | --- | | Mentee | 4.16 | 199.84 | | Class | (2.26, 6.06) 0.95 | (108.68, 291.00) 45.62 | | Control mean | ( −0.92, 2.82) 18.11 | ( −44.00, 135.24) 1231.77 |

FAQs

Why are most microenterprise training programs not cost-effective?

Many training programs are expensive to implement and often fail to produce statistically significant improvements in microenterprise profitability. The cost and weak measurable benefits together undermine cost-effectiveness.

What does the study’s mentorship program involve?

Young, female microenterprise owners are paired with a selected mentor, and mentor-mentee pairs meet and discuss the business four times over one month. Participants also receive incentives to continue through follow-up surveys.

What is the cost-benefit result of mentorship compared with training?

The study finds that for each dollar spent on treated firms, average profit increases by 1.63 USD, reflecting both higher impact and lower costs. Mentorship increases profit while classroom training does not, and mentorship compares favorably to other supply-side interventions.

Jul 19, 2026

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