Profit Sharing Study

August 5, 2009

I have been working on a new task for the past week and a half: designing and implementing a study of how VEF beneficiaries share profits from their business. To collect the data, I have again enlisted the evaluators from the longevity study to visit businesses included in the study.

A quick reminder on how VEF businesses are set up: before receiving the $150 grant, five people must form themselves into a group and come up with a business idea and plan. The group then attends business trainings together, and after completing all the preparation they receive the grant and begin (or, in some cases, continue) their business.

The goal of this study is to determine how many of those five actually end up benefitting directly as a result of their involvement in the business. We also want to get some data on the different ways in which businesses share profits among the members and pool profits for group investments. On a broader scale, the study is attempting to gauge the true impact of VEF’s grant. If you know the number of households that benefit (in this case, if a husband and wife were in the same group they would count as just one beneficiary) you can extrapolate that to assume that all the dependents in the household benefit as well.

There are a number of challenges in implementing the study. First and foremost, talking about income and business profits is just as touchy a subject here in Kenya as it is in the United States. I have tried to minimize talk of “money” and “profits” in the survey as much as possible. Instead, much of the interview focuses on discussing the different tasks that each active member performs. In doing so, we are able to gauge how much each member contributes to the business; that contribution should have a correlation to the share of profits that that member receives. After getting that information, there are questions that address profits specifically. I have told the evaluators to phrase the questions in ways that will get the point across but are not be as direct as simply asking “what percentage of the profits do you get?” We are also interviewing at least two members of each group to ensure that we are getting reliable data.

Secondly, trying to gauge what constitutes a “household” poses a tough problem. Almost everyone who lives in each village is related to each other either by blood or by marriage, so simply asking whether a member has any family members in the group does not yield accurate data. Compounding the problem was that some group members live in the same compound but in different houses. To classify them as one unit would be misleading because they each provided for their own families separately. So the question I came up with was “how many group members eat food from the same kitchen?” If you share a kitchen with someone, the two of you share the burden of buying and preparing food that is prepared in that kitchen. Thus, the incomes that both people got from the business would go towards caring for the same dependents. Under the theory that each household has “x” number of dependents, it is possible to calculate the total number of people that benefit from the VEF program. So if there are two people in a group who share the same kitchen, they should only count as one household for purposes of multiplying the number of households in the group by the number of dependents in each.

I hope that complicated explanation made sense. I’ll be back out in the field tomorrow collecting more data.