Business grant following natural disasters and its different impact on the performance of female and male-owned microenterprises: Evidence from Sri Lanka

This paper investigates gender differences in return to business grants following natural disasters, and tries to identify mechanisms underlying the unequal effects. I use a panel data-set from an experiment in Sri Lanka, which was carried out by researchers from the World Bank group and other universities, to measure the different impacts of a business grant on the performance of female and male-owned firms following the 2004 Indian Ocean tsunami. The sample includes 608 microenterprises, in which there were 297 female-owned firms and 311 male-owned firms. The survey collected information about firm performance, firm characteristics and owner characteristics from April 2005 to December 2010. There were 338 firms (Male = 176, Female = 162) in the treated group that received the grant (cash or business equipment) and 270 firms (Male = 135, Female = 135) in the control group that did not receive the grant. Firm performance, which is measured by firm profit, was assessed by using the linear regression with fixed effects in an intention-to-treat analysis. My result suggests that the business grant has a positive impact on the performance of male-owned firms, but zero effect on that of female-owned firms. There are several potential mechanisms that drive the result, including gender differences in business investment, in household expenditures and in initial businesses closure. Additionally, I find a positive treatment effect of the business grant on psychological recovery of recipients, but there is no evidence supporting gender differences in this dimension. This study provides new evidence of gender differences in the impact of business grants on firm performance in the context of postdisasters, and has implications for business recovery programs aimed at supporting female microentrepreneurs in the aftermath of large-scale catastrophes.