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Séminaire (programme 3 – BSE)

Michael Grimm

(University of Passau)

Supporting small firms in a fragile context: Comparing matching and cash grants in Burkina Faso

Abstract: We used a randomized trial to compare matching grants earmarked for business development services with more flexible cash grants and with no support. The experiment was implemented in a fragile setting where subsidizing innovative activities might be particularly important. Firms were selected on the basis of a business plan competition. All firms were operating in sectors related to agriculture. After two years, beneficiaries of cash grants were clearly performing better than beneficiaries of matching grants and firms in the control group, and were more resilient to the COVID-19 crisis. However, even for beneficiaries of cash, improvements were limited to investment, business practices, innovation skills, and survival, with no transformative effects on profits and employment, except for firms in industry and services. Beneficiaries of matching grants showed improved management practices and somewhat higher innovation skills, but complained about complex procurement. Implementation costs were 25% higher for matching than for cash grants.