to train workers on the job help in tackling youth unemployment, evidence from Uganda shows that wage subsidies are effective in increasing firm profits in the short-run as workers learn more firm-specific skills (Alfonsi et al., 2017).<sup>9</sup>

# **3.2.Interventions improving access to capital, assets, and finance**

While experimental evidence on finance programs for microentrepreneurs documents negative effects on firm outcomes (Grimm and Paffhausen, 2015), a recent meta-analysis on 16 studies finds positive effects of finance interventions for SMEs on capital investments, firm performance (output, sales, exports etc.) and employment. The meta-analysis, however, did not illustrate significant effects on profitability and wages. Although finance programs have a significant impact on SME productivity, these effects take several years to materialize (Kersten et al., 2017).

Awarding grants is the most widely used instrument in developing countries. It is effective in increasing innovation and other investment activities. The efficacy on other outcomes depends on its size and beneficiary characteristics. A majority of interventions that provide small cash grants of US$100-$200 to micro firms, such as those in Ghana had find null effect on profits among subsistence enterprises (e.g. Fafchamps et al. 2014; Karlan, et al. 2015), especially those owned by females. By comparison, the same grants provided to robust businesses had positive effects on firm profits (Fafchamps et al. 2014).<sup>10</sup> Larger grants of US$ 50,000 offered to growth oriented entrepreneurs through a business plan competition, such as the YouWin! in Nigeria is known to have been highly effective in raising the probability of either starting a new business or firm survival, sales, profits and innovation, by increasing access to both capital and labor (McKenzie, 2017). Business plan competitions in Ethiopia, Tanzania, and Zambia, which offered smaller grants of USD 1,000 also had positive effects on the probability of starting a business and firm performance. Winners were more likely to be self-employed six months after the competition than two runners-up in each committee. The experiment also documented large positive effects on firm size (Fafchamps and Quinn, 2017).

The effects of grants aimed at starting self-employed activities are larger for women relative to men but disappear in the longer run. In Uganda, the Youth Opportunities Program (YOP) was designed to help unemployed young adults become self-employed by forming groups and preparing proposals for grants (USD 7,500) on getting vocational training and starting their business. The program had large effects

> 9 Gains from wage subsidies on youth unemployment materialize quickly but fade out over time, while vocational training gains emerge slowly but are long-lasting, leading worker employment and earnings to rise above the firm trained workers. Skills of vocational training workers are certified and therefore can be demonstrated to potential employers. It appears that the vocational training model could be more effective in dealing with youth unemployment.

> 10 In-kind grants that support the payment for equipment and inventories generate larger benefits for female-led firms than cash grants in Ghana because they help address problems of self-control.

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