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Most support programs targeted at small firms in low- and middle-income countries fail to generate transformative effects at a large scale due to poor targeting, too little flexibility, and the limited size of the support, among others. This paper assesses the short-term effects of a randomized targeted government support program for small and medium-size firms that were selected based on a business plan competition. One group received large cash grants of up to USD 8,000, with flexible conditions of use. A second group received grants of an equally important size but earmarked to business development services and thus less flexible and with a required own contribution of 20 percent. A third group served as a control group. All the firms operate in agribusiness or related activities in a semi-urban area. An assessment of the short-term impacts shows that beneficiaries of cash grants engage in better business practices, such as formalization and bookkeeping. They also invest more. Yet, this does not translate into higher profits and employment. There is no effect on investment and business practices among beneficiaries of grants for business development services. Yet, both treatment groups show a higher ability to innovate relative to the control group. The results also show that cash grants cushioned the adverse effects of the COVID-19 pandemic. A further round of data collection will soon allow assessing the longer-term effects of the interventions, which may differ from the short-term effects analyzed here as both interventions may need time to unfold their full effects.

Agribusiness --- Agriculture --- Business Development Service --- Cash Transfers --- Entrepreneurship --- Finance --- Firm Support Program --- Grants --- Private Sector Development --- Randomized Control Trial --- Safety Nets and Transfers --- Small and Medium-Sized Enterprises --- Social Protections and Labor --- Social Safety Net

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The financial crisis arose in the industrial countries, but has affected developing countries through higher interest rates, sharp changes in commodity prices, and reductions in investment, trade, migration and remittances. For most low-income countries, shocks that affect food prices or wage rates for unskilled workers seem likely to have the largest impact on poverty, with the declines in key food prices associated with the crisis helping to reduce poverty, while declining trade, investment, and remittance flows have had adverse impacts on the poor. Policies to address the crisis must include measures to deal with financial sector problems, the resulting reductions in aggregate demand, and the particular vulnerabilities of poor people. Given the complexity of the impacts from financial crises and commodity price shocks, there is a strong case for developing better social safety net policies that can offset the adverse impacts of a wide range of different shocks on poor people without creating costly market distortions.

Aggregate demand --- Capital flows --- Commodity --- Commodity price --- Commodity prices --- Currencies and Exchange Rates --- Debt Markets --- Developing countries --- Economic Theory & Research --- Emerging Markets --- Finance and Financial Sector Development --- Financial assets --- Financial crises --- Financial crisis --- Financial instruments --- Financial sector --- Financial system --- Food prices --- Income --- Industrial countries --- Interest rates --- Low-income countries --- Macroeconomics and Economic Growth --- Market distortions --- Markets and Market Access --- Private Sector Development --- Savings --- Social safety net