GENERATING SKILLED SELF- EMPLOYMENT IN DEVELOPING COUNTRIES: EXPERIMENTAL EVIDENCE FROM UGANDA Policy brief presentation by Ibrahim Mukisa, 11/22/2016 1

Background  From 1987 to 2006, the northern region was affected by insecurity and further destabilised by the war in the neighbouring countries of Sudan and Democratic Republic of Congo.  As a result, nearly two-thirds of people (About 6 million people) in the region were unable to meet basic needs, just over half were literate, and most were underemployed in subsistence agriculture.  Furthermore, the average person in the Northern region was known to have almost no access to formal finance.  In 2006, Government of Uganda announced a third Northern Uganda Social Action Fund (NUSAF) component: the Youth opportunities Program (YOP).  The YOP, focused on the youth as they were nearly 80 percent since many of the adults died during the insurgency in the region. 11/22/2016 2

Research Question  What is the impact of YOP in terms of a conditional cash transfers/grants on employment and occupational choice, income and social stability?  This program (YOP) was designed to help the poor and unemployed become self-employed artisans, increase incomes, and thus promote social stability.  This study therefore, seeks to investigate the impact of such a cash transfer on skilled self-employment, incomes and social stability. 11/22/2016 3

intervention  Youth in Uganda’s conflict-affected North were invited to form groups and submit grant proposals for vocational training and business start- up.  Through coordination by government, groups of young adults, aged roughly 16 to 35, were invited to apply for cash grants to start a skilled trade, such as carpentry or tailoring  First, people had to apply as a group.  Secondly, groups had to submit a written proposal stating how they would use the grant for non-agricultural skills training and enterprise start-up costs. 11/22/2016 4

 Third the program involved government screening where upon submitting a proposal, the districts verified it based on a set out technical criteria that included; the group size, complete proposal and, demonstration of acquired skills to operate a business of choice.  Finally, successful proposals received a cash transfer to a bank account in the names of the management committee that included mainly trusted and respected elders from the communities, with no government monitoring thereafter.  This program was overly subscribed since there 535 groups eligible for the program and the study randomly assigned 265 of the 535 groups (5,460 individuals) as beneficiaries and 270 groups (5,828 individuals) as non- beneficiaries, stratified by district and a gender dimension was included for inclusiveness of the program. 11/22/2016 5

Methodology  Randomization was the method used  A baseline survey was conducted, prior to funding the beneficiary groups  After the disbursement of funds two end-line surveys were conducted that is; a two-year and a four-year end-line survey.  Statistical test were conducted to address issues related to bias that would arise due to errors in reporting outcomes by both the beneficiaries and non-beneficiaries of the program.  Contamination bias between study villages was unlikely as the 535 groups were spread across 454 communities in a population of more than 5 million, and non-beneficiaries groups were typically very distant from beneficiaries villages 11/22/2016 6

Findings Impacts on employment and occupational choice  The program increased total hours worked a week by 4.1 in 2010 and 5.5 in This translates to 17 % increase in labour supply relative to controls in both years. This increase was almost entirely in the skilled trades.  Thus participation and hours in a skilled trade are 2 to 2.5 times greater than in the non-beneficiaries group  However, agricultural hours rose at the same rate in the beneficiary and non-beneficiary groups.  Being a beneficiary of the program did not increase migration or urbanization rates  The program also increased business formalization and employment of others  Beneficiaries increased paid and unpaid hired labour. The bulk of this increase, however, was outside the skilled trade. The program increased hours of hired labour, paid and unpaid, by 210 hours (38% relative to the non-beneficiaries group). 11/22/2016 7

Findings  Effects on income  Assignment to receive a YOP grant increased earnings by UGX 14,605 ($8.50) in 2010 and UGX 18,186 ($10.50) in This translates into increases of 41% and 38% respectively relative to non-beneficiaries.  The program affected both men and women equally, although women took longer to realize these gains. By 2012, the earnings of men beneficiaries increased by UGX 17,949 (a 29% increase over non-beneficiary men) and women’s earnings increased by UGX 18,630 (a 73% increase over non-beneficiary women).  The gender difference in benefiting effects was not statistically significant 11/22/2016 8

Findings Social cohesion and stability  Overall, there was no evidence that reducing individual idleness and poverty through a cash transfer reduces dislocation, aggression or unrest 11/22/2016 9

Policy Recommendations  In principle, microfinance especially the government initiatives like the Micro finance support centre and SACCOS could play the same role as cash transfers/grants. This will go along way in making financing more affordable to the poor. However, there is need to lower the cost and raise the term length of microfinance. This might help address the sustainability issues of the cash transfer  Evidence suggests that YOP affected the vulnerable group positively thus this program should continue to be supported as it addresses youth unemployment issues.  Since there is no evidence that reducing individual idleness and poverty through a cash transfer reduces dislocation, aggression or unrest, the case for public investments in employment should be based on economic returns alone. 11/22/

Conclusion  Conditional cash transfers or grants lead to substantial and persistent increases in investment, work and income.  There is no evidence that reducing individual idleness and poverty through a cash transfer reduces dislocation, aggression or unrest, thus public investments in employment should be based on economic returns alone.  Grants to women generate equally high returns implying that cash has more promise for women’s self-employment generally.  Given the benefits of cash grants, microfinance institutions could play the same role as grants if they are made more affordable by lowering their cost and raising the term length of payment. 11/22/

Thank You for listening 11/22/