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Providing financial and in-kind assistance improves living standards for all but for some more than others: Evidence from a randomized evaluation conducted in Upper Egypt

Thu, 04 Nov, 2021

Sawiris Foundation for Social Development hosted a seminar on Sunday, September 12 in collaboration with the Abdul Latif Jameel Poverty Action Lab Middle East and North Africa based at The American University in Cairo to discuss findings of a study conducted on the effects of loans and grants on microenterprises performance and poverty alleviation.

People who are poor or at risk of poverty often struggle to access financial resources that can support them in starting or maintaining businesses that sustain their basic needs. In recent decades, development practitioners and policymakers have been exploring microcredit as a possible solution to improve access to finance for those most in need. Evidence about the impact of microcredit has been mixed, and requires deeper study. Moreover, the type of financial assistance may come in various forms: in-kind grants, cash grants or low-interest loans.

In 2016, Sawiris Foundation for Social Development (SFSD) partnered with the Abdul Latif Jameel Poverty Action Lab Middle East and North Africa (J-PAL MENA) to evaluate the impact of a financial assistance program. J-PAL affiliated researchers Adam Osman and Bruno Crépon led a research team to evaluate the impact of a financial assistance program that was implemented by non-governmental organizations (NGOs) REDEC, the Federation for Economic Development Associations (FEDA) and Christian Peace. Launched in Qena, the program is implemented in Egypt’s ninth poorest governorate in Egypt (out of 27 governorates) with a poverty rate of 41% in 2019.

The program assessed the impacts of various forms of financial assistance offered, including cash grants, in-kind grants, and loans. The NGOs screened interested individuals between the ages of 21 to 35 and who had a sound business plan for a new or an existing business. The researchers measured the impact of the different types of assistance on microenterprise growth in Upper Egypt. Although different types of financial assistance have shown growth in businesses and general economic welfare of its recipients, the study traced the varying degrees of impact, taking into consideration recipients’ variable characteristics such as gender, education, and experience. The overarching findings point in the direction that it matters greatly not only what types of microfinance products that are offered, but also who is receiving the financial assistance and what are their personal traits.

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