The Massification Paradox: Why Greater Microcredit Availability May Reduce Entrepreneurial Value Creation — Evidence from the CAPEC Network in Mauritania

Abstract

While the post-2015 randomised evaluations have established that microfinance produces modest but heterogeneous impacts on entrepreneurial activity, evidence from Sahelian and Islamic contexts remains scarce. This paper tests the heterogeneity hypothesis in Mauritania, an under-studied case combining low financial inclusion (21 per cent of adults banked in 2021), a hybrid Arab-African cultural setting, and a young microfinance sector dominated by the CAPEC cooperative network. Drawing on a survey of 624 active CAPEC borrowers across the three wilayas of Nouakchott (response rate 83 per cent), we estimate two logistic regression models linking eight microfinance dimensions — grouped under massification of credit and institutional sustainability — to two entrepreneurial outcomes: enterprise creation and value generation. Results reveal a sharp asymmetry: massification variables (geographic proximity, ease of access, communication outreach) significantly drive enterprise creation, while institutional sustainability variables explain value generation only weakly. Most strikingly, the availability of microcredit programmes correlates negatively with value creation, suggesting a saturation or crowding-out effect consistent with cross-country evidence from Andhra Pradesh and Morocco. We interpret these findings through an integrated framework combining agency theory, financial inclusion theory, and institutional theory, and discuss implications for sequencing microfinance policy in fragile institutional environments.