Banking Competition, Convergence and Growth across Macro-Regions of MENA

Samah Issa, Claudia Girardone and Stuart Snaith

This paper represents the first study to examine convergence of bank competition in the Middle East and North Africa (MENA) and the impact of bank market power on growth. Using a sample from 16 countries over 2005-14 and forming macro-regions based on oil export allowances to capture intra-regional country differences, our results suggest that banking competition has increased over the period under investigation. In addition, using alternative tests, we find clear evidence of convergence in banking competition across the three macro-regions, as well as in MENA as a whole. Further, our results show that industrial sectors that are normally more dependent on external financing grow faster in countries characterised by greater financial development. Finally, our analysis of the impact on economic growth points to a positive and significant effect of bank market power on economic growth in two out of three macro-regions. This is in line with the relationship lending literature that suggests that in a competitive environment, banks will be less willing to avail finance to informationally opaque firms. A major implication of this analysis is that some degree of market power in the banking sector may be beneficial because it can improve lending availability and, hence, economic growth.

On Modelling the Determinants of TFP in the MENA Region: A Macro-Micro Firm-Level Evidence

Nesreen Seleem, Chahir Zaki

Using enterprise surveys for MENA countries, this paper estimates total factor productivity (TFP) and examines its determinants. Our contribution is twofold. First, we provide TFP estimates by country and sector for the MENA region and examine how TFP changes by export status, age, firm size, formal status and ownership. Second, we combine both micro (firm level) and macro (nation level) determinants of TFP. Our findings show that among the micro determinants, government ownership, foreign capital, female managers, owning a foreign certification, and formal registrations of firms are all positively associated with TFP, with competition also exerting a positive impact on firms’ productivity. All the macro determinants on the other hand, with the exception of trade openness, display the expected impact on TFP as suggested by the literature. Longer time to enforce contracts, high tax burden and high lending rates tend to have a significantly negative impact on TFP. Higher tariffs, however, has a surprisingly positive impact on TFP which may emphasize the adverse impact trade openness can have on TFP as a result of the economy’s increased dependence on imported products and its limited ability to absorb the positive spillovers of trade.

Growth of Micro, Small and Medium enterprises (MSMEs) in MENA countries: constraints and success factors

Rim Ben Ayed Mouelhi and Monia Ghazali

This study attempts to contribute to a better understanding of the main constraints/ boosters for MSME growth in selected countries of the MENA region (Tunisia, Egypt, Morocco and Jordan). A multinomial logit model is used to investigate the impact of a three-fold classification of firm growth determinants (company characteristics, manager characteristics and business environment characteristics). The Database is provided by the World Bank Enterprise Surveys (MENA ES). Results give statistically robust evidence that innovative firms are more likely to grow. Therefore, the implementation of efficient and well governed systems of innovation is a priority in MENA region.

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