Microfinance institutions provide business training to its clients/owner managers to start and expand businesses. The literature reveals that business training given by MFIs helps improve the performance of both the MFIs and its clients (i.e., Owner managers of microenterprises). In effect, due to business training, MFIs can have improved loan repayment rates, client retention, and client satisfaction, while the owner-managers can have better sales, profits, and skills. However, despite the importance of business training to both MFIs and owner-managers’ performance, there is a dearth of research undertaken to explore the effectiveness of business training intervention in microfinance setting. In this study, effectiveness is defined in terms of the impact of business training on the performance of MFIs and owner-managers (i.e., training – performance dyad). Hence, the purpose of this exploratory study is to examine the factors affecting the effectiveness of business training given by the MFIs in Sri Lanka. A multiple case study method was used to carry out the study. The study was guided by the Industrial Marketing Purchasing (IMP) group framework. Thus, the study looks at how operating environment, atmosphere, interacting parties and the interaction process affect the effectiveness of the training intervention. The findings reveal that lack of money and low client demand for the operating environment influence training effectiveness. Further, it was identified that factors such as better loan repayment and new venture creation motivate the MFIs to provide business training, whereas better business knowledge and business performance motivate the owner-managers to receive business training. These motivators are part of the atmosphere that has a bearing on the effectiveness of business training. The findings further show that the characteristics of the interacting parties (i.e., trainers and trainees in this study) could affect business training effectiveness. Thus, the trainer’s expertise, trainer being internal or external, and trainer being full time or part-time can influence the training-performance dyad. Further, the owner-managers’ expertise and organizational structure could also affect the effectiveness of training. Several factors enhance the interaction between trainers and owner-managers. They are the trainer’s expertise and the owner-manager/client, trainer readiness, communication, follow-up procedures, feedback, and owner manager’s willingness. Further, location, duration of the training, charging a fee or not, the voluntary/compulsory nature of training, and the provision of subsidies also could enhance the interaction between the trainers and the owner-managers. Therein, this study contributes to the knowledge domain of microfinance. The findings are useful to practitioners and policymakers in microfinance as they can look at the IMP framework to identify factors that could enhance the business training-performance dyad. In this study, the client and the owner-manager are used interchangeably.
Keywords: Microfinance, Business Training, Business Development Services, Case Study Method, IMP Framework.