Macroeconomics Implications of Female Entrepreneurs Facing Financial Frictions to Access to Credit: A DSGE Model Approach in Cameroon

Abstract

This research assesses the effects of financial frictions faced by female entrepreneurs on macroeconomics performances in Cameroon. We address this important issue, using a Dynamic Stochastic General Equilibrium model with financial micro-foundations. The model features two sectors such as, a production sector dominated by female entrepreneurs and a production sector dominated by male entrepreneurs. Financial frictions appear because entrepreneurs face collateral constraints when borrowing from the banking sector. The steady state and the calibration analysis demonstrate that the female sector is labor-intensive whereas the male sector is capital intensive. But, when the female sector is granted loans to the same extent as in the male sector, it performs better in term of value-added in GDP. The benchmark analysis reveals the complementary role of both sectors in sustaining economic activity during a downturn. The Scenarios analysis emphasizes the expansionary effect of the loosening financial constraint, with female entrepreneurs acting as main driver of the economy activity. Thus, institutional frameworks that relax collateral constraints, grant exemptions for enormous requirements, enforce properties right law, and promote transparency and credit-information sharing can make big inroads in alleviating borrowing constraints, increasing financial inclusion and enhancing macroeconomic outcomes.