Financial Inclusion and Sustainable Growth in North African Firms: A Dynamic-Panel-Threshold Approach

Abstract

This paper investigates the impact of financial inclusion on sustainable firm growth in Northern African countries (Egypt, Morocco, and Tunisia) during the period of 2007–2020. To this end, this study employs a dynamic panel threshold regression (DPTR) model. This model is a panel-data model that can capture different behaviors of data, depending on a threshold variable. The main results showed the existence of a threshold effect. This means that when financial inclusion is low (high), sustainable firm growth is limited (significant) due to the absence (presence) of appropriate financing, information, and financial tools. However, the levels of financial inclusion in North African countries are insufficient and require improvement. Therefore, it is essential for policymakers and managers to continue to promote the quality of financial inclusion by improving access to financial services and the regulatory environment to facilitate firms’ access to financing and support their sustainability.

How Financial Inclusion Moderates the Curvilinear Nexus between Tangible Investment and Sustainable Firm Growth: New Evidence from the Middle East and North Africa Region

“…In addition, financial inclusion promotes the formalization of the economy, increasing investor confidence and creating a healthier and more dynamic business environment [47]. It stimulates firm growth, encourages investment, and contributes to sustainable economic development [20,48,49].…”

“…More specifically, a few recent studies have examined the linear link between financial inclusion and sustainable firm growth (or sales growth and firm performance) [66][67][68][69]. In addition, other recent studies have examined the nonlinear (threshold effect) link between financial inclusion and firm growth [1,49].…”

“…It is often applied to predict asset purchases, forecast cash flows, develop borrowing strategies, assess the long-run competitiveness and profitability, and assess the long-run growth. Following [49], we used the model from [3] to compute the SFG rate, which has the following description:…”

“…Empirical studies have used different indicators that represent different aspects of financial inclusion, such as the use of banking systems, penetration, and availability [67,82]. In this context, several studies [49,83,84] have suggested that combining these different aspects of financial inclusion could be an effective approach to assess the global development of financial inclusion.…”

Financial inclusion and market-based performance: empirical evidence from Syrian banks

“…Through their analysis, the study explored how digital inclusive finance initiatives impact the ability of SMEs to overcome financial mismatches and enhance their innovation capacity. The study conducted by Kh emiri et al (2023) investigated the relationship between financial inclusion and sustainable growth in firms located in North Africa. The findings contributed to the literature by providing insights into the threshold effects of financial inclusion on firm growth and shed light on the potential mechanisms through which financial inclusion can contribute to sustainable economic development in North African countries.…”