GLOBAL FINANCIAL DEVELOPMENT REPORT 2014
ing-country governments to foster technological upgrading and innovation. A matching grant consists of a partial subsidy to a firm for the use of business development services or similar activities. They often cover 50 percent of the cost. Despite their widespread use, there is little evidence on the effectiveness of the grants in spurring firms to undertake activities they would not have otherwise undertaken or whether the grants merely subsidize firms for actions they would have taken anyway. A randomized impact evaluation of a matching grant program in Mexico finds that subsidized business consulting services led to short-run improvements in the productivity of firms and to a long-run increase in employment among firms, that is, to firm growth (Bruhn, Karlan, and Schoar 2013). To expand the evidence base, researchers have tried to conduct impact evaluations of matching grant programs in other countries, for
BOX 3.8
FINANCIAL INCLUSION FOR FIRMS
137
example, in six African countries. However, these attempts have ultimately failed in part because the programs received few applications (Campos and others 2013). This lack of demand may be caused by overly strict eligibility criteria, red tape, capture by special interest groups, or incentives facing project implementation staff and suggests that matching grant programs are difficult to implement. Several countries have experimented with encouraging innovation and job creation through business plan competitions. A recent example that has garnered much attention is Nigeria’s YouWiN! competition (box 3.8). Fiscal incentives can also be used to stimulate innovation and research and development. More and more countries are implementing these policies to incentivize firms to invest in research and development. Mulkay and Mairesse (2013) have examined the impact of the research and development tax
Case Study: Nigeria’s YouWiN! Business Plan Competition
The Youth Enterprise with Innovation in Nigeria Program (YouWiN!) is a business plan competition for young entrepreneurs in Nigeria sponsored by the country’s Ministry of Finance, Ministry of Communication Technology, and Ministry of Youth Development, with support from the U.K. Department for International Development and the World Bank. The program was launched on October 11, 2011, by President Goodluck Jonathan in a ceremony aired live on national television. It has the stated objective of encouraging innovation and job creation through the establishment of new businesses and the expansion of existing businesses. The program combines training with cash grants to build business capacity and reduce fi nancing constraints to promote business creation and growth. In response to advertisements throughout the country via television, radio, newspapers, and road shows, the program received almost 24,000 applications from youth aged 18 to 40 years. Nigeria has approximately 50 million people in this age range. The 24,000 applications therefore represent only 0.05 percent of the overall youth population.
As is typical with business plan competitions, YouWiN! does not provide access to fi nance on a broad scale. Instead, the program seeks to target fi rms and business ideas with high potential. This is refl ected in the fact that the level of educational attainment is higher among applicants than among the overall population. According to data from the 2008 general household survey, among the overall youth population, 5.5 percent have a university education, compared with slightly more than 50 percent of the YouWiN! applicants. YouWiN! applications were scored by the Enterprise Development Center of the Pan-African University, a private, nonprofit educational institution located in Nigeria’s capital, Lagos. Based on these scores and geographical location, 6,000 candidates were selected to attend a four-day training session, which took place in December 2011, with 4,873 individuals participating. All applicants who attended the training were then given until late January 2012 to submit a business plan. In total, 4,510 business plan applications were received. These were scored by a joint Enterprise Development (box continued next page)