One-Time Transfers of Cash or Capital Have Long-Lasting Effects on Microenterprises in Sri Lanka

Abstract

Cashing Up: Do small businesses in developing economies benefit from an infusion of cash or of capital, such as inventory or materials, and is the effect a momentary blip or a sustained expansion? De Mel et al. (p. 962 ) have extended their study of one-time cash or capital transfers to a group of randomized business owners in Sri Lanka to look at the status of the businesses 5 years later and find an increased likelihood of survival and higher profits for male-owned enterprises, but no significant effects on female-owned businesses. The authors suggest that capital transfers are more likely to be used by male-owned firms to grow the business, but more likely to be “cashed-out” from female-owned firms and diverted to household uses.