in their firms. A beneficiary of a matching grant said: “There is no need of hiring more workers now, I prefer to treat better my current workers.”

# **7. Conclusion**

We analyzed the short-term impacts of two innovative interventions to enhance private sector development and to create jobs in a resource-poor and rather rural setting. The interventions relied on a rigorous targeting based on a business plan competition and offered sizeable grants and complementary training in business practices as well as a careful monitoring. These are all features that many previous interventions that have been subject to rigorous evaluations were missing and, at least partly, may explain that they generated only moderate or no effects.

Yet, the interventions of this study had to deal with many difficulties, including institutional frictions, an increasing countrywide political and social instability, and the COVID-19 pandemic. Together, these seriously affected the project implementation, especially by delaying the transfers to the beneficiaries and by dampening demand, making it difficult to draw benefits from new investments. Nevertheless, the results based on the first follow-up survey can provide many interesting insights and are rather promising from the perspective of the implementers, at least with respect to the beneficiaries of cash grants, who were served on average a bit earlier than recipients of matching grants.

Investment significantly increased for the beneficiaries of cash grants. More firms in the group of cash beneficiaries invested, and they invested on average much higher amounts. Yet, the period was too short to have triggered any additional investment beyond the grants handed out. There is also no effect on investment for recipients of matching grants; yet, matching grants were earmarked for BDSs only, so any investment effect would be a second-order effect. The impact on profits for beneficiaries is slightly negative. Although, we cannot pinpoint the exact mechanism behind this, a plausible explanation could be that the investments caused additional costs and that more time is needed to increase production and sales especially in the context of several overlapping crises. There is also not yet an effect on employment, maybe for the same reasons; yet, at least for recipients of cash grants, one can detect a small effect on the number of working days, suggesting a higher effort level. The reason for optimism gives results on a whole range of intermediate outcomes. The impacts on formalization, banking, bookkeeping, and a summary measure of innovative behavior are throughout positive for beneficiaries of cash grants and the latter even for beneficiaries of matching grants. The next follow-up survey, which will be completed by the end of 2021, will show whether these changes also result in sizeable impacts on the targeted ultimate outcomes, especially employment.

The follow-up survey will then also allow to conduct a rigorous comparison between cash grants and matching grants. Besides the differences in use, they differ significantly in the procurement rules that are attached to them. Already during this first phase of the project, it became apparent that strict procurement rules create substantial costs in terms of time and staff. In-depth discussions with beneficiaries document their difficulties to understand and comply with the complexities of the entire disbursement process. Hence, we will compare the costs of procurement to the potential loss due to misuse and fraud to see which is the most cost-effective avenue to provide support. Misuse and fraud may for example have occurred in cases where firms have ‘disbursed’ large amounts of money, but according to our data did not make any significant investments or did not consult any business support services. Yet, it will of course not be trivial to detect such cases.

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