Existing research has identified limited management capacity as a constraint among micro and small entrepreneurs, potentially limiting firms’ profits and sales growth. According to the United Nations, formal and informal micro, small, and medium enterprises make up over 90% of all firms and account for 70% of all employment globally. Equipping owners of such enterprises with key business management skills could be a powerful anti-poverty tool.

Traditional financial education, including traditional business training often aspires to change behavior by affecting knowledge. However, the determinants of human behavior can be much more complex than knowledge or awareness, given the fact that people often face cognitive limits as well as hassles associated with attending such trainings in-person. For example:

• People have limited cognitive capacity, i.e. synthesizing classroom knowledge into real world behavior can be difficult or done incorrectly.
• Conditions of scarcity can further exacerbate these limitations. Constrained by time or money, limited attention leads to systematic neglect of decision making.
• Hassles associated with attending in-person training for an entrepreneur (scheduling, transport, time away from managing the business) tend to suppress attendance.

In order to overcome these limitations faced by micro-entrepreneurs in low-income countries, new attention has turned to rules-of-thumb based pedagogies which distil information, otherwise taught in class, in actionable form. Further, heuristics offered over the mobile phone are easier to administer, are less costly, and take substantially lesser time thereby making them suitable for developing country contexts.

In order to examine the effectiveness of mobile phone based financial heuristics training, the research team partnered with two microfinance institutions (MFIs) – Janalakshmi in India and Negros Women for Tomorrow Foundation (NWTF) in the Philippines. Participants were drawn from active small business loan clients of Janalakshmi and group loan clients of NWTF; all were retail business owners and had access to a mobile phone.

The intervention included an in-person training orientation session followed by weekly training messages (3-4-minute-long and in local languages) sent to entrepreneurs’ mobile phones at the time of their choice, for 21 weeks (Philippines)/ 22 weeks (India), between 2016-2017. All messages featured the same female microentrepreneur’s voice. Each week’s recordings covered topics pertaining to cash, customer, inventory, and supplier management, were delivered in a storytelling format to keep the trainees engaged, and offered actionable tips. A randomly assigned control group did not receive any communications or training.

Adherence to individual business practices was scored based on survey responses and aggregated into a composite index to estimate impact.

A randomized evaluation found the mobile-based financial heuristics training substantially increased the likelihood that micro-entrepreneurs adopt better financial practices across an index of business practices. The index was constructed based on 17 key parameters pertaining to cash, credit, inventory and supplier management. The bar chart presented below shows the percentage change in the composite business practice index among micro-entrepreneurs who received the training, relative to the control group, in each country, at least 3 months following the training completion.

**p<.05, ***p<.01, significant increases relative to control

About 75% of the clients picked up the training calls and listened to at least two thirds of the message content. In the Philippines, the financial heuristics training produced a statistically significant (p<.01) increase of 0.13 standard deviations on the composite business practice index. Statistically significant effects of training were observed on the ‘separation of business and household cash’ component (p<0.01) and on the ‘calculation of profits’, ‘recording important customer credit information’ and ‘visiting competitors for comparison of goods/prices’ components (p<.05). In India, the financial heuristics training produced a statistically significant (p<.05) impact of 0.07 standard deviations on the composite business practice index with improvements in the ‘separation of business and household cash’ component (p<.01) and the ‘stock-out in past 2 weeks’ component (p<.05). However, we did not find statistically significant intervention effects in either country on revenues or profits 3 months following the training. Wide confidence intervals obtained indicate that this experiment was not well-powered to detect effects on sales and profits within this timeline.

Inspired to implement this design in your own work? Here are some things to think about before you get started:

• Are the behavioral drivers to the problem you are trying to solve similar to the ones described in the challenge section of this project?
• Is it feasible to adapt the design to address your problem?
• Could there be structural barriers at play that might keep the design from having the desired effect?
• Finally, we encourage you to make sure you monitor, test and take steps to iterate on designs often when either adapting them to a new context or scaling up to make sure they’re effective.

Additionally, consider the following insights from the design’s researcher:

• Keep in Simple: It is important to ensure that the training messages are short, engaging and relevant to the local context of the entrepreneur.
• Context Matters: Holding an in-person orientation before the training calls start helps in setting up micro-entrepreneurs’ expectations around the training as well as helping them understand how to use their mobile phone for receiving the training calls.
• Right Framing: Training calls should reach micro-entrepreneurs at a time of the day they are not busy so that they can answer and listen to the content. It is important to specifically nudge micro-entrepreneurs to think of the time of their day when they are not busy to receive the calls.
• Technology Platform: A reliable and automated technology platform is critical to the success of this intervention. An automated platform is easy to use, allows to push thousands of audio messages at a time and reduces chances of human error.
• Rigorous User Testing: It is important to ensure the messages resonate with micro-entrepreneurs as well as a smooth functioning of the technology platform. A rigorous user testing exercise helps assess whether the messages and platform work well and offer an opportunity to iterate on any aspects of the program based on feedback received. It also familiarizes program implementers about program logistics and management, before a larger roll-out.
• Cost Considerations: In countries where airtime costs are low, mobile phone based training is an effective alternative to in-person business trainings. In countries with high airtime costs, the evidence that this training has positive impact on business practice adoption and its ease of access/launch of mobile based training could drive the choice between in-person vs. digital training instead of cost considerations. In India where airtime costs are very low: costs of mobile phone based training were 67% lower than existing classroom-based training. In the Philippines where airtime costs are high: the training costs of mobile and in-person trainings were comparable.