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

Abstract

Factors 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.