Evidence Generation
Asia
Evidence Generation
Asia
In collaboration with the Micro and Small Enterprises Authority, the Ministry of ICT, Innovation and Youth Affairs, and IPA Kenya, researchers conducted a randomized evaluation in Kenya to measure whether the way entrepreneurs are selected in a business plan competition—and the size of the grants they receive—affects firm growth and employment among young entrepreneurs. The competition used a streamlined process and a more rigorous, multi-stage process, with winners receiving a grant of either USD 9,000 or USD 36,000.
After three years, gains among firms that won grants through the streamlined process disappeared while firms selected through the multi-stage process had higher employment, sales, and profits, with similar impacts between the two grant sizes. The findings suggest that how entrepreneurs are selected for support matters more for sustained firm growth than how much capital they receive.
Read the paper here.
Across low- and middle-income countries in Sub-Saharan Africa, a high majority of firms remain small, employing only the owner or a handful of workers, and few grow into businesses that hire more staff.1 This shortage of expanding firms limits the number of jobs available to young workers entering the labor force. This challenge is acute in Kenya, where young people ages 15 to 24 face an unemployment rate of 15 percent.2 Kenya's informal sector has also continued to grow, accounting for most new jobs created in recent years.3 Together, these dynamics strain labor productivity and economic growth. While programs that provide finance and training to microentrepreneurs have raised profits and sales in many settings, they have generally not translated into new hiring.4 This raises a central policy question: how can programs identify the entrepreneurs capable of expanding firms that hire outside workers, and how much capital do they need to do so?
Business plan competitions have become a common policy tool for addressing this challenge, aiming to identify entrepreneurs with strong growth potential and to overcome capital constraints on their growth through grants. These competitions may be able to direct scarce public resources toward the entrepreneurs most likely to create jobs, rather than spreading support across very small businesses. However, competitions vary widely in how rigorously they screen applicants and how much capital they award to winners. Moreover, limited evidence exists on which design choice, more selective screening or larger grants, matters more for generating lasting employment and firm growth.
MbeleNaBiz (“Moving Ahead with Business” in Swahili) was a nationwide business plan competition for young entrepreneurs in Kenya, implemented as part of the Kenya Youth Employment and Opportunities Project, a World Bank-financed initiative with the government to increase job opportunities for Kenyan youth. Eligible applicants to the competition were between 18 and 35 years old, Kenyan nationals, had completed at least secondary education, and were seeking to start or expand a business in Kenya. Applicants could apply with either a new business idea or an existing business, and winners received a cash grant—disbursed in installments—to invest in their business.
In collaboration with the Micro and Small Enterprises Authority, the Ministry of ICT, Innovation and Youth Affairs, and IPA Kenya, researchers conducted a randomized evaluation of the MbeleNaBiz competition to answer two questions: does more rigorous applicant selection lead to greater firm growth, and does a larger grant lead to greater firm growth?
After an initial round of scoring based on application forms, eligible applicants were randomly assigned to one of two selection pathways. In the streamlined pathway, applicants only needed to submit a business plan to qualify for a grant, with no additional scoring. Of the 1,003 applicants randomly assigned to this pathway, 829 of them submitted a business plan. After this, 500 applicants were randomly divided into three groups: a USD 9,000 grant, no grant (comparison), or assignment to the more rigorous multi-stage pathway.
In the multi-stage pathway, the scores from the initial applications were used to identify the top 4,000 applicants. These applicants then submitted their business plans, which were scored and ranked by independent judges on criteria including the business's value proposition, market understanding, financial viability, and potential to create jobs. Of the 3,182 applicants who submitted plans, the top 750 by average evaluation score and randomly divided into three groups: USD 9,000 grant, USD 36,000 grant, or no grant.
Comparing firms across the two pathways shows whether rigorous selection to receive a grant matters. Comparing the two grant sizes within the multi-stage pathway shows whether a larger grant matters. Researchers measured impacts on employment, firm size, sales, and profitability over three years following the initial grant disbursement.
Three years later, firms that received either multi-stage grants had grown substantially. The USD 9,000 and USD 36,000 groups each added about 2 to 3 workers, more than doubling employment. Moreover, sales and profits increased over the three years relative to the comparison group, by 59 to 69 percent and 52 to 60 percent, respectively. The two groups had similar results, suggesting that the larger grant did not lead to more growth. The USD 9,000 grant also created jobs at a much lower cost: about USD 4,400 per job, compared with USD 13,700 for the USD 36,000 grant.
The group that received the same USD 9,000 grant, but through the simpler selection process that skipped the additional review by independent judges, did not show measurable gains in employment, sales, or profits after three years. This suggests that the more rigorous selection process, not the money itself, helped identify firms with greater growth potential.
Grant recipients used both grant amounts in similar ways, mainly for inventory, rent, and wages, rather than on larger one-time investments. This suggests the extra funding in the USD 36,000 grant did not unlock a different kind of investment that the USD 9,000 grant could not support. The program also produced similar results for women and men, indicating it identified high-growth entrepreneurs equally well across both groups.
1. Cruz, Marcio, Florian Moelders, Edgar Salgado, and Ariane Volk. Estimating the number of firms in Africa. World Bank, 2025.
2. World Bank Data, “Unemployment, youth total (% of total labor force ages 15-24) (modeled ILO estimate) - Kenya,” World Bank Group, Date Accessed October 13, 2026, https://data.worldbank.org/indicator/SL.UEM.1524.ZS?locations=KE
3. Perpetua Etyang, “Ruto at 4: Jobs promise: How many jobs has Ruto created?” The Star, August 17, 2026, https://www.the-star.co.ke/news/2026-08-17-ruto-at-4-jobs-promise-how-many-jobs-have-been-created
4. Grimm, Michael, and Anna Luisa Paffhausen. "Do interventions targeted at micro-entrepreneurs and small and medium-sized firms create jobs? A systematic review of the evidence for low and middle income countries." Labour Economics 32 (2015): 67-85.
McKenzie, David, Christopher Woodruff, Kjetil Bjorvatn, Miriam Bruhn, Jing Cai, Juanita Gonzalez-Uribe, Simon Quinn, Tetsushi Sonobe, and Martin Valdivia. "Training entrepreneurs." VoxDevLit (2025).
