Approach :
- Introduction
- Mention the problems faced by women entrepreneurs in India.
- Highlight majorly the financial access problem to women entrepreneurs.
- Mention gender-gap in financing – an important dimension.
- Conclusion with few schemes that seek to address this issue.
In India, where women face barriers to formal economy, entrepreneurship is the practicable way to create employment opportunities for women. To promote women’s participation in entrepreneurial activities is essential, especially with the sharp decline in female employment since the pandemic – female labor force participation rate has fallen to 7% in 2021-22.
Problems of women entrepreneurs : Indian women have been severely hampered by the lack of supportive conditions for entrepreneurship. According to Mastercard Index of Women Entrepreneurs 2021, India ranked 57th amongst 65 countries. The socio-cultural barriers faced by women entrepreneurs are compounded by the burden of unpaid care work – highest in the world at 91.8% – in domestic household according to NSSO Survey 2019.
Women-owned MSMEs faced a severe financing gap of 70.37% according to IFC. The lack of financing remains the chief concern for 90% of women entrepreneurs. This is despite the striking improvements in women’s access to bank accounts, driven by Pradhan Mantri Jan Dhan Yojana.
The financing woes continues : About 58% of female entrepreneurs who start business rely on self-financing, largely their savings or physical property that can be mortgaged. This is due to social biases of the financial institutions on the credit-worthiness of women-owned & women-led enterprises. The lack of collateral further hinders women. This leads to self-perpetuating cycle as women as women are inhibited from applying for loans.
To address this gap, the Pradhan Mantri Mudra Yojana was launched in 2015 to provide collateral free loans up to Rs. 1 million for small & micro enterprises. The scheme has yielded mixed results – about 68% of the loans had been disbursed to women entrepreneurs in 2021, yet 88% were under the ‘Shishu’ category (loans up to Rs. 50,000). So it has been limited to small-ticket loans.
Gender gap in financing : So, even though the number of women bank-holders has steadily increased, it has not translated into access to institutional credit. Financial inclusion in India has emphasized deposits over access to credit. Credit received by women is only 27% of the deposits they contribute, while credit received by men is 52% of their deposits. For individual women, it is more difficult to access credit from banks – most women access credit through MFIs, SHGs, and joint liability groups. Women accounted for only 7% total bank credit, compared to 30% men. Historically, women’s finance has been equated with microfinance with social & economic outcomes of empowerment, which has limited scope of women’s finance because of the assumption that credit needs of women remain small.
Contrary to popular perceptions, women’s business have greater profit margins than those of men. The task of financial inclusion will remain incomplete until there is equitable access to bank credit for women. For this to happen, financial institutions need to overcome their gender biases and bring in gender sensitive approach to credit so that every women entrepreneur can look beyond self-financing. ‘Stand Up India’ was launched in 2016, to offer 1 million to 10 million Rupee for underserved sections like women & socially backward groups. More than 81% loans under Stand up India has been sanctioned to women entrepreneurs. The NITI Aayog too set up the Women Entrepreneurship Platform in 2018 to support new & existing women entrepreneurs through free credit ratings, mentorship, apprenticeship, and corporate partnerships.