Funding female entrepreneurs in North Africa: self-selection vs discrimination? MSMEs, the informal sector and the microfinance industry

Abstract

PurposeThis paper aims to address the following research question: Is loan funding to female entrepreneurs in Egypt, Tunisia and Morocco affected by self-selection from borrowers or/and discrimination from lenders? This paper sheds light on empirical literature review, which displays mixed evidence.Design/methodology/approachThe authors use a pooled sample of 3,896 businesses in Egypt, Morocco and Tunisia drawn from the 2013 World Bank Enterprise Survey (WBES). Despite selection biases and overweighing, the sample provides descriptive statistics upon gender ownership and gender management (human capital characteristics and financial data). The authors design two regression logistic models with interaction to investigate loan demand and loan granting with respect to self-selection vs discrimination. Female management is disentangled from female ownership with respect to entrepreneurship.FindingsNeither self-selection nor discrimination affects female owners compared with their male counterparts, whereas female managers do self-select themselves. In as much as the WBES female subsample include several biases, the authors eventually emphasise the importance of the non-surveyed informal sector, which includes most (micro-)businesses, and loan funding provided by the microfinance industry to these female businesses. Microfinance fills the gap for working capital but not for fixed assets. The size of the business is a major factor explaining both self-selection and discrimination.Research limitations/implicationsFindings of this study have important policy implications for closing the gender gap in accessing finance. In addition to supply-side factors, demand-side factors should be addressed. Informality also needs to be addressed, as many micro and small enterprises owned or managed by women are informal entities without registration or/and social protection. One way to increase women's demand for financial services is to introduce financial products to meet their needs (e.g. social protection basic coverage). Governments can help develop these new products by strengthening the microfinance industry with a favourable regulatory and institutional framework. The authors also wonder about the extension of this study. Thus, a new cross-sectional analysis of the most recent surveys in the North African region would allow the authors to enlarge the overall sample and measure the evolution of the gender gap over time.Originality/valueSo far, funding female entrepreneurship remained little investigated in these North African countries. Several sampling biases in the WBES – small businesses underestimation and manufacturing industry overweighting, which have been overlooked so far, explain the absence of self-selection and discrimination. In contrast, size plays an important role. Hence, the focus on microenterprises (the informal sector) and the microfinance industry suggests indeed that female entrepreneurs operating in small businesses have to cope with both self-selection and discrimination.

Examining the influence of financial inclusion on investment decision: A bibliometric review

“… [ 83 ] Financial Development Researching the connection between better meeting of practical requirements and women's involvement in strategic decision-making. [ 52 , 82 , 103 , 104 ] Saving Behavior Expanding the study's focus, Saving Behavior aims to consider various internal and environmental factors influencing saving behaviors, while concurrently evaluating the role of financial advisors in promoting savings and investment practices, especially in low-income, illiterate rural areas. [ 86 ] Capital Structure Investigate capital structure in microfinance institutions with the dynamics of earnings management and its relationship with debt and donated equity.…”

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

“…A multinomial logistic regression finds no evidence of gender discrimination, whereas an instrumented probit model highlights self-selection, combining low perceived creditworthiness and female risk aversion. Berguiga and Adair (2021) draw a pooled sample of 3896 businesses in Egypt, Morocco and Tunisia from the 2013 WBES, including micro-enterprises and making a distinction between managers and owners that Morsy et al (2019) overlooked. Two logistic regressions show there is neither self-selection nor discrimination for female owners, whereas self-selection affects female managers.…”

“…As for access to financing, the difficulty of being a female entrepreneur, compared with being a male entrepreneur, is lowest in Egypt (19.80%) and Tunisia (25.70%), and highest in Morocco (49.50%). Berguiga and Adair (2022) use a pooled sample of 6,253 enterprises from the 2019 WBES for six MENA countries (Egypt, Jordan, Lebanon, Morocco, Palestine and Tunisia). Two logistic regression models address loan demand and loan supply, with respect to self-selection versus discrimination of both owners and managers according to gender.…”

Qualitative Exploration of Enabler, Purpose, and Benefits of Digitalisation in the Informal Sector: Understanding the Role of Bricolage Among Women Entrepreneurs

“…Most studies explored the challenges faced by WE. These challenges included socio-economic barriers (Karakire Guma, 2015), lack of education (Jiyane & Mostert, 2008), lack of financial support (Berguiga & Adair, 2021), unawareness of governmental schemes, and facilities among others. However, studies also suggest that financial literacy can help WE in the informal sector sustain their business (Jiyane & Zawada, 2013).…”