Funded by IPA’s Entrepreneurship and Private Sector Development program and in partnership with Dharmalife Foundation, researchers are conducting a randomized evaluation in India to measure whether zero-interest loans provided in the form of inventory can empower rural women entrepreneurs economically and socially. They will also explore whether these loans improve sales capabilities relative to and in combination with marketing support.

The Challenge

Women entrepreneurs in low- and middle-income countries, particularly in rural areas, face multiple barriers to business success, including financial constraints and limited marketing knowledge. While microfinance has shown promise in enhancing financial inclusion, traditional cash-based credit often fails to address the specific challenges women face in building sustainable businesses.¹ Cash loans can be diverted to household needs or used for purposes other than business growth, limiting their effectiveness in driving entrepreneurial success.

In rural India, women entrepreneurs selling clean energy and household products struggle with two critical constraints: the inability to maintain adequate product inventory due to working capital limitations, and insufficient knowledge of effective marketing and sales techniques. Without inventory on hand, customers must wait for product delivery, limiting sales opportunities. Additionally, most rural women entrepreneurs lack training in modern marketing techniques such as product demonstrations, door-to-door sales, and community events that could significantly boost demand. These combined challenges keep women entrepreneurs unable to scale or improve their businesses or significantly increase their household incomes, despite market demand for their socially beneficial products.

The Evaluation

In collaboration with Dharmalife Foundation, researchers are conducting a randomized evaluation in India to measure whether providing zero-interest inventory loans, marketing support, or both can improve business performance, financial health, and economic empowerment among women entrepreneurs.

The intervention takes place in the state of Bihar, Northern India and involves 240 women entrepreneurs who sell clean cooking and lighting solutions. The women entrepreneurs will be randomly assigned to the following groups:

• Comparison (60 entrepreneurs): Entrepreneurs continue with standard business practices, using brochures for marketing and ordering products on demand, with working capital and marketing activities self-financed.
• Inventory support only (60 entrepreneurs): Entrepreneurs receive clean cooking and lighting products on credit (zero-interest inventory loans) with flexible repayment terms, ensuring better stock availability and reducing financial constraints.
• Marketing support only (60 entrepreneurs): Entrepreneurs receive financial and technical support for product demonstrations and promotion, including assistance with community events, door-to-door sales, and promotional materials to increase consumer awareness and demand.
• Combined support (60 entrepreneurs): Entrepreneurs receive both inventory on credit and marketing support, allowing them to leverage product availability alongside targeted promotional efforts for maximum business impact.

Researchers will measure impacts on business performance (sales, profits), financial health (income, savings), social outcomes (confidence, agency), and women's economic empowerment.

Results

Results will be available in 2027.

Sources

^1. Banerjee, Abhijit, Dean Karlan, and Jonathan Zinman. "Six randomized evaluations of microcredit: Introduction and further steps." American Economic Journal: Applied Economics 7, no. 1 (2015): 1-21.

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