In a country where women face barriers to entering the formal economy, entrepreneurship is the only practicable way to create employment opportunities amongst them. Yet Indian women are severely hampered by the lack of support for entrepreneurship.
According to the Mastercard Index of Women Entrepreneurs 2021, India ranked among the worst performers on this score. Women in countries like Nigeria, Uganda, Vietnam and the Philippines were engaging in entrepreneurial activities at a faster pace than men. 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. As per the National Sample Survey of 2019, nearly 92 per cent of women— the highest in the world— are confined to unpaid domestic work for the household. There are many reasons for this.
The one that can be addressed easily is the financing gap faced by women entrepreneurs. The rub is that despite striking improvement in women’s access to bank accounts, driven in recent years by the Pradhan Mantri Jan Dhan Yojana, there are still many gaps. Women-owned MSMEs in India faced a whopping gap of 70.37 per cent in financing, according to a study by the International Finance Corporation. About 58 per cent of female entrepreneurs who start businesses between the ages of 20 and 30 years rely on self-financing.
This is due to social biases on the part of banks and financial institutions on the credit-worthiness of women-led enterprises. The lack of collateral, due to limited access to assets and property, further hinders women’s progress in business. To address the gap, there have been a slew of Government schemes.
The Pradhan Mantri Mudra Yojana was launched in 2015 to provide collateralfree loans up to Rs. 10 lakh for small and micro enterprises. This did help. According to data from the Ministry of Finance, about 68 per cent of the loans had been disbursed to women entrepreneurs in 2021. However, 88 per cent of these were under the ‘Shishu’ category (covering loans up to Rs. 50,000).
Similarly, ‘Stand Up India’ was launched in 2016, to offer loans from Rs 10 lakh to Rs 1 crore for the underserved sections of society, including women. More than 81 per cent of loans under Stand Up India have been sanctioned to women entrepreneurs. In addition, the Government think-tank Niti Aayog set up the Women Entrepreneurship Platform in 2018, to help women entrepreneurs through free credit ratings, mentorship, funding support, apprenticeship and corporate partnerships.
The number of women holding bank deposits has steadily increased. The All India Debt and Investment Survey in 2019 showed 80.7 per cent of women in rural India and 81.3 per cent in urban India had deposits in banks.
But this has not translated into access to credit. The policy of financial inclusion in India has emphasised deposits over access to credit. Credit received by women is only 27 per cent of the deposits they contribute, while the credit received by men is 52 per cent of their deposits, according to a 2020 study by the Reserve Bank of India.
The data for Mudra Yojana where 88 per cent of loans were in the category of up to Rs. 50,000 and the majority of the borrowers were women, underlines the assumption that women’s requirements are restricted to small 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. 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 young women entrepreneurs in India who start businesses can look beyond self-financing.
