Financial institutions need to adopt a more inclusive approach to drive and accommodate women entrepreneurship in India.
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India has consistently disappointed its women entrepreneurs. In a country where women are barred from entering the formal economy, entrepreneurship is the only viable way to create employment opportunities for women. The country needs to boost women's participation in entrepreneurial activities, especially due to the sharp decline in women's employment from epidemics - the participation of women in the urban labor force has declined to 7 per cent in 2021-22, according to recent figures focusing on the Indian economy.
Indian women are facing huge hurdles due to unfavorable conditions for entrepreneurship. According to the MasterCard Index of Women Entrepreneurs 2021, which looks at the progress of women in business, India was ranked lowest in the world, ranking 57th out of 65 countries. Women in countries like Nigeria, Uganda, Vietnam and the Philippines, which are included in the index, were facing entrepreneurial activity faster than men, despite socio-cultural barriers and infrastructure barriers.
The socio-cultural barriers facing women entrepreneurs are common in every part of the world, but they are exacerbated by the workload of unpaid care in India, which is the highest in the world.
Women in countries like Nigeria, Uganda, Vietnam and the Philippines, which are included in the index, were facing entrepreneurial activity faster than men, despite socio-cultural barriers and infrastructure barriers.
However, this article focuses on the financing that women entrepreneurs face. In 2015, according to a study by the International Finance Corporation, there was a huge gap of 70.37 per cent in financing for women-owned MSMEs in India. Lack of funding is the main concern - 90 per cent of women entrepreneurs in the country depend on informal resources. This is despite the significant improvement in women's access to bank accounts through the Pradhan Mantri Jan Dhan Yojana in recent years.
Good intentions fall short
According to IWWAGE's assessment, about 58 per cent of women entrepreneurs in India who start a business in the age group of 20 to 30 years rely on self-financing, mainly on their savings or inherited property or mortgaged physical assets. This is due to the social bias of banks and financial institutions on the creditworthiness of women-led industries महिला women-owned industries are considered risky and the rate of rejection of loan applications from women entrepreneurs is higher in developing countries. Lack of collateral, due to limited access to wealth and property, further hinders women. This prevents women from applying for loans, which in turn creates a permanent cycle. Varied research and observations in past and present confirms that women entrepreneurs are more focused than their male counterparts and maintain a better credit profile.
There are several government schemes to bridge this gap. Pradhan Mantri Mudra Yojana was launched in 2015 to provide mortgage-free loans of up to INR 1 million for small and micro enterprises. The combined results of this scheme have been seen. Although the proportion of women borrowers is high - about 68 per cent of loans disbursed to women entrepreneurs in 2021, according to figures shared by the finance ministry, 88 per cent of these loans were in the 'infant' category. In currency schemes, Rs. 50,000). While the scheme has clearly benefited women, it is limited to small-ticket loans.
The NITI Commission established the Women Entrepreneurship Platform in 2018, an ecosystem that supports new and existing women entrepreneurs across the country through free credit ratings, guidance, funding support, trainees and corporate partnerships.
Similarly, “Stand Up India” was launched in 2016, which provided loans ranging from Rs 1 million to Rs 10 million for disadvantaged sections of the society like women entrepreneurs and socially backward groups.
Under Stand Up India, more than 81 per cent loans have been sanctioned to women entrepreneurs. In addition, the NITI Commission established the Women Entrepreneurship Platform in 2018, an ecosystem that supports new and existing women entrepreneurs across the country through free credit ratings, guidance, funding support, trainees and corporate partnerships. There is limited literature on the impact of these schemes on barriers to women.
Changes in the formal financing of women borrowers
Despite the steady increase in the number of women holding bank deposits - the All India Credit and Investment Survey 2019 shows that 80.7 per cent of women in rural India and 81.3 per cent of women in urban India have deposits in banks). India's economic inclusion policy has focused on deposits rather than credit access.
So what explains the gender gap in financing? According to a 2020 study by Pallavi Chavan of the Reserve Bank of India's Supervision Department, credit to women accounts for only 27 per cent of their contributions, while credit to men accounts for 52 per cent of their deposits. A handful of scholars to analyze women's access to banking in India. To show that it is more challenging for individual women to get loans from banks, this study differentiates the loans that individuals get from the total loans to women. Most women can get bank credit through microfinance institutions, self-help groups and joint liability groups. Using 2017 data, women account for only 7 percent of total bank credit, compared to 30 percent for men. Microfinance institution,
Mudra Yojana data underscores the assumption that 88 per cent of loans were in the range of INR 50,000 and the majority of borrowers were women, with women's needs limited to small loans.
Historically, in the developing world, women’s finances have been equated with microfinance with the social and economic consequences of their empowerment, limiting the scope of women’s finances due to the underlying assumption that women’s credit needs remain small. Mudra Yojana data underscores the assumption that 88 per cent of loans were in the range of INR 50,000 and the majority of borrowers were women, with women's needs limited to small loans. The increase in the share of women in bank loans over the last few years is a positive sign in itself, an increase in the short-term categories of personal and consumer sustainable loans.
Contrary to popular belief, women's businesses are more profitable than men's and women entrepreneurs represent greater opportunities for financial institutions. Moreover, the task of financial inclusion will not be complete unless women have equal access to bank credit. To do so, financial institutions need to overcome their gender biases and bring a gender-sensitive approach to credit, so that 58 per cent of young women entrepreneurs in India start businesses that look beyond self-financing.
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