Pressures from peers and spouses and self-control problems as constraints to microenterprise growth: Experimental evidence from Pakistan

• In developing countries, microfinance has been shown to be of limited effectiveness in helping small enterprises grow. This is especially the case when these enterprises are female-owned.
• This project collected experimental and field data from the Punjab region of Pakistan to explore how exactly female-owned micro-enterprise growth tends to be constrained, as well as the lack of agency experienced by female micro-entrepreneurs.
• The project lead a microfinance lender in Pakistan to consider how to better design its products to encourage female empowerment.

In developing countries, microfinance has been shown to be of limited effectiveness in helping small enterprises grow. This is especially the case when these enterprises are female-owned. Even accessing microfinance in the first place is disproportionately difficult for most women.

This project sought to create a more detailed picture in the Punjab region of Pakistan of what exactly constrains female micro-entrepreneurs from both accessing microfinance in the first place, and from using it to productively invest in their enterprises.

Two potential constraints were preliminary identified. First, the idea that self-control problems can lead these women to postpone productive investments that have large future payoffs; second, the idea that gendered pressures from spouses and peers can lead female micro-entrepreneurs to divert resources from investment to other uses, to conform with gender norms.

Researchers conducted behavioural experiments with potential clients of the Pakistan’s largest microfinance lender, the National Rural Support Programme (NRSP), and combined the results of this with survey data collected in the Punjab region and elsewhere to test these ideas.

The evidence collected suggested that as expected, female entrepreneurs tend to internalise gender norms, and these directly affect how they would decide to use a microfinance loan, or to even apply for one in the first place. These preliminary findings have encouraged NRSP to investigate the effect that their products have had on the agency of their female applicants, and to seek to design different products that can more effectively lead to female empowerment.