India has consistently let down its women entrepreneurs. In a country where women face barriers to entering the formal economy, entrepreneurship is the only practicable way to create employment opportunities amongst women. To promote women’s participation in entrepreneurial activities is essential for the country, especially with the sharp decline in female employment since the pandemic—the female labour force participation rate amongst urban women has fallen to 7 percent in 2021–22, shows recent data by Centre for Monitoring Indian Economy. Indian women have been severely hampered by the lack of supportive conditions for entrepreneurship. According to the Mastercard Index of Women Entrepreneurs 2021, which looks at the progress of women in business, India was amongst the lowest-ranked in the world, at 57^th position amongst 65 countries. Women in countries like Nigeria, Uganda, Vietnam, and the Philippines, which featured in the index, were engaging in entrepreneurial activities at a faster pace than men, despite the socio-cultural barriers and infrastructural constraints they face in those countries. The socio-cultural barriers faced by women entrepreneurs are common in every part of the world, but they are compounded by the burden of unpaid care work on women in India, the highest in the world—91.8 percent of women in India participated in unpaid domestic work for the household, according to the National Sample Survey Office survey in 2019.

Women in countries like Nigeria, Uganda, Vietnam, and the Philippines, which featured in the index, were engaging in entrepreneurial activities at a faster pace than men, despite the socio-cultural barriers and infrastructural constraints they face in those countries.

This article, however, focuses on the financing gap faced by women entrepreneurs. Women-owned MSMEs in India faced a whopping gap of 70.37 percent in financing, according to a study by the International Finance Corporation in 2015. The lack of financing remains the chief concern—90 percent of women entrepreneurs in the country rely on informal sources of financing. This is despite the striking improvement in women’s access to bank accounts, driven in recent years by the Pradhan Mantri Jan Dhan Yojana.

Well-intentioned policies fall short

About 58 percent of female entrepreneurs in India who start businesses between the ages of 20 and 30 years rely on self-financing, largely their savings, or inherited assets or physical property that can be mortgaged, as per an assessment by IWWAGE. This is due to social biases on the part of banks and financial institutions on the credit-worthiness of women-led enterprises—women-owned enterprises are perceived to be risky and the rejection rate of loan applications from women entrepreneurs is higher in the developing world. The lack of collateral, due to limited access to assets and property, further hinders women. This, in turn, leads to a self-perpetuating cycle as women are inhibited from applying for loans. This is when most research confirms that women are more disciplined than male borrowers and have a better credit profile. To address the gap, there has been a slew of government schemes. The Pradhan Mantri Mudra Yojana was launched in 2015 to provide collateral-free loans up to INR1 million for small and micro enterprises. The scheme has yielded mixed results. Though there is a preponderance of women amongst borrowers—data shared by the Ministry of Finance shows about 68 percent of the loans had been disbursed to women entrepreneurs in 2021, yet 88 percent of these were under the ‘Shishu’ category (covering loans up to Rs. 50,000 in Mudra Yojanas). Though women clearly benefited from the scheme, it has been limited to small-ticket loans.

NITI Aayog set up the Women Entrepreneurship Platform in 2018, an ecosystem to support new and existing women entrepreneurs across the country, through free credit ratings, mentorship, funding support, apprenticeship, and corporate partnerships.

Similarly, “Stand Up India” was launched in 2016, to offer loans from 1 million to 10 million rupees for the underserved sections of society such as women entrepreneurs and those from socially backward groups. More than 81 percent of loans under Stand Up India have been sanctioned to women entrepreneurs. In addition, NITI Aayog set up the Women Entrepreneurship Platform in 2018, an ecosystem to support new and existing women entrepreneurs across the country, through free credit ratings, mentorship, funding support, apprenticeship, and corporate partnerships. There is limited literature on the impact these schemes have had against the barriers faced by women.

Individual women borrowers short-changed in formal finance

Even though the number of women holding bank deposits has steadily increased—the All India Debt and Investment Survey in 2019 showed 80.7 percent of women in rural India and 81.3 percent in urban India had deposits in banks)—it has not translated into access to credit. The policy of financial inclusion in India has emphasised deposits over access to credit. So what explains the persistent gender gap in financing? Credit received by women is only 27 percent of the deposits they contribute, while the credit received by men is 52 percent of their deposits, according to a 2020 study by Pallavi Chavan, from the Department of Supervision at the Reserve Bank of India, and amongst a handful of scholars to analyse women’s access to banking in India. The study separates credit to individuals from total credit to women to demonstrate that for individual women, it is even more challenging to access credit from banks. Most women are able to access bank credit through microfinance institutions, self-help groups and joint liability groups. Using data from 2017, women accounted for only 7 percent of total bank credit as compared to 30 percent for men. Women’s share in total credit increased to 8 percent when the credit to microfinance institutions, self-help groups, and joint liability groups was included.

The data for Mudra Yojana where 88 percent of loans were in the category of up to INR 50,000 and the majority of the borrowers were women, underlines the assumption that women’s requirements are restricted to small loans.

Historically, in the developing world, women’s finance has been equated with microfinance with its social and economic outcomes of empowerment, which has limited the scope of women’s finance because of the underlying assumption that the credit needs of women remain small. The data for Mudra Yojana where 88 percent of loans were in the category of up to INR 50,000 and the majority of the borrowers were women, underlines the assumption that women’s requirements are restricted to small loans. Though there has been a rise in women’s share in bank credit in the last few years, which in itself is a positive sign, the increase has been in short-term categories of personal and consumer durable loans. Contrary to popular perception, women’s businesses have greater profit margins than those of men, and women entrepreneurs represent a huge opportunity for financial institutions. Moreover, the task of financial inclusion will not be complete until there is equitable access to bank credit for women. For that to happen, financial institutions will need to get over their gender biases and bring in a gender-sensitive approach to credit, so that the 58 percent of young women entrepreneurs in India who start businesses can look beyond self-financing.

• Gender
• India
• Economy
• employment
• entrepreneurs
• gender gap
• MUDRA Yojana
• NITI Aayog
• Pradhan Mantri Jan Dhan Yojana
• Women

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