Entrepreneurship is the only proven way to provide employment opportunities for women in a nation where they face barriers to participating in the financial ecosystem, but India has consistently failed to support its female entrepreneurs.
Promoting women’s participation in venture creation is critical for the country, especially given the sharp fall in female employment since the pandemic. According to recent data from the Centre for Monitoring Indian Economy, the female workforce participatory rate among urban women has gone down to 7% in 2021-22.
As per World Bank Group’s most recent Global Findex report, more than 1 billion women to this day do not use or have access to the financial system. Also, over 70% of women-owned small and medium enterprises do not have access to adequate financial services, according to an estimate by the IFC or International Finance Corporation; there is a $300 billion financing gap for formal, women-owned start-ups globally.
Without access to credit, women struggle to build their startups, generate and save the cash flow, and pull their families out of economic hardship. As a result, women are still largely excluded from the formal economy. The socio-cultural limitations that women entrepreneurs confront are widespread around the world, and they are amplified by the fact that India has the greatest number of unpaid care and domestic women workers in the world (91.8% of Indian women engage in unpaid domestic work for the household, as per a 2019 survey by the National Sample Survey Office).
Women’s participation in bank credit has increased over the past few years, which is a positive development in and of itself, but the growth has primarily been in the short-term categories of personal and consumer durable loans. According to the top management of leading organizations, women have proven to be resilient entrepreneurs who can adapt to challenges, as they secure more seats in executive positions.
One of the biggest obstacles Indian women face in pursuing entrepreneurship is a lack of financial resources. Plenty of government initiatives have been introduced to fill the gap. In 2015, to give small and micro businesses collateral-free loans up to INR 1M, the Pradhan Mantri Mudra Yojana was introduced. Although there are more women borrowers than men, data from the Ministry of Finance shows that in 2021, 68% of loans went to women entrepreneurs; however, 88% of these loans fell into the “Shishu” segment (covering loans up to INR 50,000 in Mudra Yojanas). Despite the scheme’s benefits for women, it has only been used for small-ticket loans.
What’s worse?
- According to 2015 research by the IFC, the financing gap for women-owned MSMEs in India was huge, almost at 70.37%. The main issue is the lack of funding; 90% of women business owners between the ages of 20 and 30 years in India rely on unofficial sources of funding.
- According to the Mastercard Index of Women Entrepreneurs 2021, which examines the growth of women in business, India came in 57th place out of 65 countries. Female business owners typically self-finance their ventures, relying primarily on their savings, inherited assets, or real estate that can be mortgaged. Despite socio-cultural gaps and infrastructure limitations, nations like Nigeria, Uganda, Vietnam, and the Philippines scored better.
- Due to social biases on the creditworthiness of banks and other financial institutions, women-led businesses are seen as risky by official lenders. Several government programs’ benefits also are primarily limited to small-ticket loans. However, the majority of research says otherwise.
One bright side:
- In 2016, “Stand Up India” was formed to provide loans ranging from 1M to 10M rupees for the underprivileged segments of society, such as female entrepreneurs and people from socially disadvantaged groups. More than 81% of the loans provided by Stand Up India have been passed to women entrepreneurs.
- The World Bank Group is enhancing women’s ability to start and grow their businesses, enhancing their employment opportunities and workplace environment, by amplifying their voices as business leaders through programs like Banking on Women, Better Work, SheWorks, and Women on Boards.
- The Women Entrepreneurship Platform was established by NITI Aayog in 2018 as a platform to help new and established women business owners nationwide through free credit scores, mentoring, funding, internships, and company partnerships.
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