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Series of ERUDITE Ph.D Dissertations Series of ERUDITE Ph.D Dissertations N° 01-2020 Title Financial Inclusion, Entrepreneurship and Gender An Empirical Assessment using Microeconomic Data Author Fozan FAREED UNIVERSITÉ PARIS-EST ÉCOLE DOCTORALE ORGANISATIONS, MARCHÉS, INSTITUTIONS LABORATOIRE ÉRUDITE 2019-2020 Thèse pour le doctorat en Sciences Économiques Présentée et soutenue publiquement par FOZAN FAREED 20th May, 2020 Financial Inclusion, Entrepreneurship and Gender An Empirical Assessment using Microeconomic Data Under the supervision of Professor Julie LOCHARD and Professor Catherine BROS Érudite, Université Paris-Est Members of the Jury Pr. William PARIENTÉ Professor at UC Louvain Referee Pr. Rohini SOMANATHAN Professor at Delhi School of Economics Referee Dr. Amina LAHRECHE Deputy Division Chief, IMF Examiner Pr. Patrick LENAIN Assistant Director, OECD Examiner Pr. Melika Ben SALEM Professor at University Gustave Eiffel President of the Jury L’UNIVERSITÉ PARIS-EST n’entend donner aucune approbation ni improbation aux opinions émises dans les thèses; ces opinions doivent être considérées comme propres à leurs auteurs. 2 Abstract Abstract Financial inclusion as part of the development process has gained considerable attention from policymakers worldwide. The numbers remain quite stark as 1.7 billion people worldwide, as of 2017, remain without access to basic financial services. This PhD thesis aims to empirically disentangle some of the many interrelationships between financial inclusion, entrepreneurship and gender. It consists of four chapters and relies on the use of nationally representative survey data at the individual level. The first chapter studies the effect of geographical access to microfinance on entrepreneurship and examines if having this access enables individuals to move up the economic ladder in Pakistan. The second chapter examines if financial inclusion promotes women’s autonomy by generating women entrepreneurship. This chapter also constructs a comprehensive financial inclusion index to measure the state of financial inclusion in Mexico after taking into account access as well as the usage of different financial products. The third chapter explores the main drivers of financial exclusion in Pakistan after taking into consideration the need for credit and voluntary financial exclusion. Finally, the fourth chapter proposes a novel methodological approach for measuring household financial vulnerability by relying on unsupervised machine learning algorithms in the case of U.S. All these chapters use pseudo-panel datasets and rely on several methodologies to tackle endogeneity issues and concerns pertaining to selection bias. The results indicate that financial inclusion, entrepreneurship and gender are intimately related with each other. Microfinance seems to play an effective role in promoting entrepreneurship and enabling individuals to move up the economic ladder, whereas financial inclusion also seems to encourage women’s autonomy by fostering entrepreneurship. The empirical results also uncover the main drivers of involuntary financial exclusion: financial illiteracy, poverty, and gender. Moreover, this thesis considers new methodological approaches to analyze household financial vulnerability and involuntary financial exclusion as an alternative to the standard line of research on these topics. Key words: Financial inclusion, entrepreneurship, gender, microfinance, credit, savings, employment, labor market, economic ladder, poverty, economic development, panel data, instrument variables, endogeneity, selection bias, household financial vulnerability, unsupervised machine learning. 3 Abstract Abstract (In French) Dans le cadre du processus de développement, l'inclusion financière a attiré une attention considérable de la part des décideurs du monde entier. Les chiffres restent assez frappants avec 1,7 milliard de personnes dans le monde n'ayant toujours pas accès aux services financiers de base. Cette thèse vise à démêler empiriquement certaines des nombreuses interrelations entre l'inclusion financière, l'entrepreneuriat et le genre. Elle se compose de quatre chapitres et repose sur l'utilisation de données longitudinales au niveau individuel. Le premier chapitre étudie l'effet de l'accès géographique à la microfinance sur l'entrepreneuriat et vérifie si cet accès permet aux individus de gravir les échelons économiques au Pakistan. Le deuxième chapitre examine si l'inclusion financière favorise l'autonomie des femmes en promouvant l'entrepreneuriat féminin. Ce chapitre construit également un indice complet d'inclusion financière pour mesurer l'état de cette dernière au Mexique après avoir pris en compte l'accès ainsi que l'utilisation de différents produits financiers. Le troisième chapitre explore les principaux facteurs de l'exclusion financière au Pakistan après avoir pris en considération le besoin de financement et l'exclusion financière volontaire. Enfin, le quatrième chapitre propose une nouvelle approche méthodologique pour mesurer la vulnérabilité financière des ménages en s'appuyant sur des algorithmes d'apprentissage automatique non supervisés aux États-Unis. Tous ces chapitres utilisent des données d'enquêtes représentatives au niveau national et s'appuient sur plusieurs méthodologies pour résoudre les problèmes d'endogénéité et de biais de sélection. Les résultats indiquent que l'inclusion financière, l’entrepreneuriat et le genre sont étroitement liés les uns aux autres. La microfinance semble jouer un rôle efficace dans la promotion de l’entrepreneuriat et dans l’ascension des échelons économiques des individus. L’inclusion financière semble, elle aussi, encourager l'autonomie des femmes en favorisant l'entrepreneuriat féminin. Les résultats empiriques révèlent également les principaux facteurs de l'exclusion financière involontaire: l'analphabétisme financier, la pauvreté et le genre. De plus, afin d’analyser la vulnérabilité financière des ménages ainsi que l’exclusion financière involontaire, cette thèse utilise de nouvelles approches méthodologiques pouvant être considérées comme une alternative aux standards de recherche sur ces thématiques. 4 Acknowledgements Acknowledgements This research would not have been possible without the support of many people. First of all, I would like to extend my gratitude to both my supervisors, Prof. Julie LOCHARD and Prof. Catherine BROS, for their constant support and guidance on research, writing, teaching, career steps and much more. I am grateful for their confidence in me since the master’s program and I am extremely appreciative of their persistent encouragement throughout the three and a half years of my PhD. I am also very honored to have a jury of esteemed professors and researchers in my PhD committee. I am grateful to Melika BEN SALEM, Amina LAHRECHE, Patrick LENAIN, William PARIENTÉ, and Rohini SOMANATHAN for taking out the time from their busy schedules and for providing me with valuable feedback on my research work. I would like to thank the Higher Education Commission of Pakistan (HEC) and Campus France for providing me with a scholarship and for helping me out with all the logistics throughout the course of my PhD in France. I would also like to thank the Erudite lab and the O.M.I doctoral school for providing a supporting environment for research and for sponsoring my participation in international research conferences. I also thank Thanh-Ha for her prompt administrative help in my research as well as teaching related activities. During my PhD, I got the chance to work at the International Monetary Fund (IMF) in Washington DC and the Organization for Economic Cooperation and Development (OECD) in Paris. I am very grateful for these opportunities to carry out research at these international organizations and work alongside some amazing people who have incredible skills and great work ethic. I would like to extend my appreciation to all my colleagues, especially Julien Reynaud, Patrick Lenain, Anastasia Guscina, Christoph Duenwald, and Koshy Mathai, for all the helpful discussions and guidance. Most of my PhD research was conducted at the Erudite lab, and it goes without saying that many of its members contributed to the progress of my work. I would like to thank Eric Defebvre for helping me out with econometrics related questions. In addition, I would like to thank Neha, Redha, Juliette, Justine, Arnold, Patrick, Sylvain, Christoph, and Sandrine for all the discussions (serious and otherwise) and for all the fun times (doing sports together and trying out the best pizza places in Paris). I also wish to thank Juliette, Sumbul, Neha and Elisabeth for reading parts of my 5 Acknowledgements research and providing useful feedback, and last but not least, a special thanks to my dearest and close friends Simon and Jelena for their amazing friendship and for giving me some of the best memories in Paris. I also wish to thank my family, especially my parents, who always believed in me and gave me their unconditional support. Baba and mama, this PhD would not have been possible without your encouragement and love. 6 Table of Contents Abstract .......................................................................................................................................... 2 Acknowledgements ....................................................................................................................... 5 Table of Contents .......................................................................................................................... 7 List of
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