Boosting Women’s Earnings: The Role of Nicaragua’s Small Business Program

The study evaluates Nicaragua's Small Business of the Family Economy (SBFE) programme, finding it significantly boosts earnings for low-educated female self-employed workers through increased labor supply and diversification but shows no impact on overall or male earnings. This highlights the need for gender-tailored, context-specific interventions in self-employment support.

Researchers from Seoul National University, Harvard University, and Yonsei University conducted an in-depth evaluation of the Small Business of the Family Economy (SBFE) program in Nicaragua. This government initiative, launched in 2012, aims to support self-employed individuals in sectors such as agriculture, forestry, and commerce. Administered by Nicaragua’s Ministry of Family Economy in collaboration with the National Institute of Technology (INATEC), the program offers comprehensive business training, skill-building sessions, and market access strategies. A distinctive focus is placed on empowering women by addressing gender-specific barriers and fostering female participation in entrepreneurial activities.

Mixed Results in Programme Impact

Using data from three rounds of the Nicaragua Living Standards Measurement Survey (LSMS), researchers adopted a quasi-experimental approach to assess the program’s outcomes. While the SBFE program showed no significant impact on the overall earnings of self-employed workers, it had notable benefits for certain subgroups. Specifically, women with low levels of education saw considerable gains. Female participants with primary education experienced a 14.5% increase in earnings, while those with secondary education enjoyed an 18.3% rise. These results highlight the program's ability to generate targeted benefits for marginalized groups, leaving broader impacts inconclusive.

However, For male participants, the program did not lead to statistically significant changes in income or labor supply. This stark contrast underscores the program’s differential effectiveness across gender lines, raising questions about how interventions can be better designed to address the unique constraints faced by men in self-employment.

A Closer Look at Gendered Outcomes

The SBFE program’s gender-focused design played a key role in its impact on female participants. Women, particularly those with limited education, often face significant barriers to self-employment, such as restricted access to training, networks, and resources. The program addressed these challenges through targeted outreach, skill-building activities, and opportunities to connect with markets. This tailored approach enabled women to diversify their income streams, with many taking up second jobs or extending their work periods to increase earnings.

In contrast, the program’s benefits for male participants were minimal, suggesting a potential mismatch between the program’s offerings and the specific needs of men in self-employment. While women often start from a lower economic baseline, allowing for more room to grow, men may require different forms of support, such as access to credit or tools to scale their businesses.

Rigorous Methods and Robust Validation

To ensure the reliability of their findings, the researchers employed a difference-in-differences strategy combined with propensity score matching. These methods enabled them to compare outcomes for eligible and non-eligible workers while controlling for pre-existing differences. Robustness checks, including falsification tests and parallel trend analyses, confirmed that the earnings trends of eligible and non-eligible groups were similar before the intervention, strengthening the case for attributing observed impacts to the SBFE program.

Despite its methodological rigor, the study acknowledges certain limitations. The absence of individual-level data on program participation and the non-random assignment of eligibility introduce potential biases. However, the use of quasi-experimental techniques, alongside detailed demographic and economic controls, mitigates these concerns to a significant extent.

Lessons for Policy and Practice

The study offers valuable insights for policymakers in developing countries with high levels of informal self-employment. Targeted interventions, like the SBFE program, can play a critical role in empowering marginalized groups, particularly women. By addressing gender-specific barriers, such programs not only improve individual outcomes but also contribute to broader goals of income equality and inclusive economic growth.

However, the mixed results also highlight the need for a more nuanced approach. While the program’s design effectively catered to the needs of low-education women, it failed to generate significant benefits for male participants or higher-educated groups. Future iterations of similar programs may need to incorporate components that address diverse needs, such as sector-specific training, access to financial resources, or mentorship for scaling businesses.

The scalability and sustainability of the SBFE’s intensive training model also warrant further exploration. While the program’s high resource requirements contributed to its effectiveness for certain groups, they may pose challenges for broader implementation. Policymakers must balance inclusivity with cost-effectiveness, ensuring that interventions are adaptable to varying regional and economic contexts.

A Path Toward Inclusive Growth

The SBFE program underscores the transformative potential of targeted business training initiatives in addressing gender disparities and fostering economic empowerment. By enabling women to overcome structural barriers, the program contributed to meaningful improvements in their earnings and work opportunities. These findings align with broader evidence suggesting that well-designed interventions can yield substantial benefits for female entrepreneurs in developing countries.

Nonetheless, the study also highlights the challenges of achieving widespread impact in diverse populations. The lack of significant benefits for men underscores the importance of tailoring interventions to meet the distinct needs of different groups within the self-employed workforce. For developing economies like Nicaragua, this research provides a blueprint for designing effective, inclusive policies that support self-employment and reduce inequality.

While the SBFE program demonstrates the potential of targeted interventions, its mixed outcomes emphasize the need for adaptive, context-specific approaches. By addressing the unique challenges faced by various demographic groups, policymakers can build on the success of initiatives like the SBFE to create more equitable and sustainable pathways to economic growth.