Hurdles to financing micro‐entrepreneurs in MENA countries prior and during COVID‐19

Abstract

AbstractFactors detrimental to funding females or micro‐entrepreneurs arise both from the demand side of businesses, such as the absence of funding need versus self‐selection despite account holding, and from the supply side of financial institutions, such as deficient financial infrastructure and discrimination towards loan applicants. A sequential model addresses both the demand and the supply sides, prior and during the COVID‐19 pandemic, upon four MENA countries, namely Egypt, Jordan, Morocco and Tunisia. Probit regressions use two distinct though comparable sub‐samples of micro‐enterprises from the 2020 World Bank Enterprise Survey (WBES) and the Economic Research Forum (ERF) COVID‐19 Monitor in 2021. Prior the pandemic, micro‐enterprises are prone to self‐selection vis‐à‐vis loan application in Tunisia (ERF) and in all North African countries (WBES). During the pandemic, no self‐selection vis‐à‐vis government support affects either female or micro‐entrepreneurs. Prior the pandemic, females or micro‐entrepreneurs face no loan discrimination (WBES). During the pandemic, females face no discrimination regarding government support, whereas Moroccan micro‐entrepreneurs do (ERF). Prior the pandemic, financial inclusion runs opposite to both self‐selection and discrimination (WBES), but not for self‐selection (ERF), whereas it proves insignificant during the pandemic with respect to self‐selection or discrimination, whatever the sub‐sample.