One-Time Transfers of Cash or Capital Have Long-Lasting Effects on Microenterprises in Sri Lanka

Standard economic theory suggests that one-time business grants can have at most temporary effects, and accordingly, policies to increase incomes of the self-employed in developing countries typically rely on sustained engagement. In contrast, we found long-lasting impacts from one-time grants given in a randomized experiment to subsistence firms. Five years after we gave 100 or 200 to 115 of 197 male and 100 of 190 female Sri Lankan microenterprise owners, we found 10-percentage-point-higher enterprise survival rates, and 8-to-12-per-month-higher profits for male-owned businesses that received the grants. Female-owned businesses showed no long-term (or short-term) impacts. Our follow-up investigation interviewed 94% of the original sample and collected survivorship data from the remaining 6%, demonstrating that tracking long-term outcomes is both feasible and worthwhile. The results suggest that one-off grants may have lasting impacts on some types of subsistence firms, challenging the view that sustained engagement is always required.