Financial Inclusion and Barriers to Funding Micro-Entrepreneurs in MENA Countries Prior to and During the COVID-19 Pandemic

Factors detrimental to financial inclusion (account holding and borrowing) regarding female 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 takes care of both the demand and the supply sides, including descriptive statistics prior to and during the COVID-19 pandemic, upon four MENA countries, namely Egypt, Jordan, Morocco and Tunisia.

Probit regressions (marginal effects) analyse financial inclusion from the demand side, using two different but somehow 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.

We address (female) micro-entrepreneur self-selection (i) prior to and (ii) during the COVID-19 pandemic, as well as discrimination (iii) prior to and (iv) during the pandemic.

Prior the pandemic, microenterprises are prone to self-selection vis-à-vis loan application in Tunisia (ERF) and in all countries from North Africa (WBES). During the pandemic, there is no self-selection vis-à-vis government support affecting either gender or micro-entrepreneurs. Prior to the pandemic, females or micro-entrepreneurs do not face discrimination in loan applications (WBES). During the pandemic, females are not subject to discrimination as a result of government support, whereas Moroccan micro-entrepreneurs do face discrimination (ERF).

Prior to 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. Hence, financial inclusion may not preclude self-selection or discrimination, which remain obstacles to the business growth of micro-entrepreneurs, that policies enhancing funding should help overcome.