Funded by IPA’s Entrepreneurship and Private Sector Development Program and in collaboration with the Reserve Bank of Malawi and IPA Malawi, researchers are conducting a randomized evaluation to measure whether a World Bank program that funnels business support based on firms’ growth potential improves business growth and job creation.

The Challenge

In low- and middle-income countries, micro, small, and medium enterprises (MSMEs) are critical for economic growth and employment, yet entrepreneurs frequently face multiple, compounding barriers that limit their ability to start, sustain, and grow a business. These challenges are acute in Malawi—where MSMEs contribute roughly 40 percent of gross domestic product and 24 percent of employment—as firm expansion remains constrained by limited access to knowledge and networks, gaps in business planning and management, and dependence on expensive informal credit mechanisms. The government has implemented support programs to drive growth, yet such programs often have applied uniform solutions that do not address the varied and complex challenges facing firms and thus struggle to deliver sustained impacts.

A promising approach to addressing these challenges is staged, performance-based business support, which begins with broad-based soft skills training and advances entrepreneurs to more intensive technical and market access assistance based on demonstrated readiness. By screening firms on growth potential and sequencing support to match their readiness, this approach may allocate resources more effectively and reduce the risk of overwhelming participants before they are prepared to implement what they have learned. Although evidence on staged, performance-based approaches remains limited, the first stage of the program is grounded in personal initiative training, which has been found to improve entrepreneurial skills and strengthen firms’ sales and profits. However, more evidence is needed as to whether soft skills gains alone are sufficient to drive firm growth, or whether complementary support addressing marketing, networking, and financing needs is necessary for these gains to translate into sustained performance improvements.

The Program

The World Bank’s Financial Inclusion and Entrepreneurship Scaling (FInES) project is a government-supported initiative in Malawi that provides support to micro, small, and medium enterprises. As part of this initiative is a component that includes a performance-based funneling approach to build entrepreneurial and business skills among enrolled enterprises. Leveraging prior rigorous evidence, the approach begins with low-cost, broad-based assistance and advances only those entrepreneurs who demonstrate the ability to learn and implement key concepts to more intensive services. The funneling approach consists of three sequential stages:

• Stage 1: An eight-week personal initiative training covering self-management skills including entrepreneurial mindset, self-motivation, proactive problem-solving, and resilience, structured as 12 in-person sessions over six months.
• Stage 2: provides targeted business training and mentoring in hard skills, including sales, operations, and financial management. Training includes three full-day in-person workshops (total 24 hours), while mentorship includes three in-person group sessions and an additional 20 hours of individual support time.
• Stage 3: One-on-one coaching focused on market expansion, supporting entrepreneurs in establishing digital storefronts on platforms such as Facebook and WhatsApp and developing digital marketing skills over four months.

The Evaluation

Researchers are conducting a randomized evaluation to assess whether the three-stage, sequenced funneling approach improves entrepreneurs’ skills and strengthens firm performance. The study includes 3,287 firms across all 28 districts of Malawi. The firms were randomly assigned to the following groups:

• Comparison: Access to a business support desk phone line only
• Stage 1 only: Soft skills training
• Stage 1 and 2: Soft skills training plus hard skills training and mentoring 
• Stage 1, 2, and 3: Soft skills training, hard skills training and mentoring, and market expansion training
• Funneling: All three stages are available, but firms advance to each subsequent stage only upon meeting performance thresholds assessed through standardized scorecards

Researchers are measuring impacts across three categories: behavioral changes, including entrepreneurial mindset and business management practices; firm performance, including sales, profits, and employment; and outcomes related to firm survival, productivity, and diversification.

Results

Results will be available in 2027.

Implementing Partner