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How Credit Constrained Are Family-Owned SMEs in Arab Countries?

Author

Listed:
  • Grakolet Gourene

    (Economic Commission for Africa)

  • Zuzana Brixiova Schwidrowski

    (Economic Commission for Africa)

  • Jiri Balcar

    (VSB - Technical University of Ostrava)

  • Lenka Johnson Filipova

    (VSB - Technical University of Ostrava)

Abstract

Family-owned firms account for majority of small and medium-sized enterprises (SMEs) in Arab countries, but evidence on the impact of this ownership type on access to credit in the region is scarce. Yet the issue is key for understanding barriers to the emergence of dynamic private sector and growth acceleration. To reduce this knowledge gap, our paper examines links between family ownership and credit constraints faced by SMEs in Egypt, Jordan, Morocco, and Tunisia, utilizing the World Bank Enterprise Surveys. We find that while family-owned firms have a higher need for credit than nonfamily-owned firms, they are more likely to be discouraged from applying for it. Due to this self-selection out of credit markets, they are more credit constrained than nonfamily firms, even though their credit application rejection rates are lower. Stronger firm governance, including presence of formal business strategies and improved managerial practices, can encourage family-owned SMEs to apply for credit more often and ease their access to finance.

Suggested Citation

  • Grakolet Gourene & Zuzana Brixiova Schwidrowski & Jiri Balcar & Lenka Johnson Filipova, 2024. "How Credit Constrained Are Family-Owned SMEs in Arab Countries?," ERSA Working Paper Series 9, Economic Research Southern Africa.
    • Handle: RePEc:rza:ersawp:9
    as

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    File URL: https://ersawps.org/index.php/working-paper-series/article/view/9/93
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    References listed on IDEAS

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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