Though there are an estimated 3 million women-owned enterprises across industries, representing about 10 per cent of all micro, small, and medium enterprises in India and employing over 8 million people, there is a sizeable financing gap for women entrepreneurs in India, according to a study.  

IFC, a member of the World Bank Group, has released a study that finds financial institutions meet only 27 per cent of the financing demand of women-owned micro, small and medium enterprises (SMEs) in India.

At the start of March, IFC had also unveiled a $600-million financing programme for female entrepreneurs in emerging markets. The organisation is of the view that gender disparity is constraining up to $320 billion in potential lending to women-owned firms in emerging markets.

According to IFC estimates, about 70 per cent of women-owned SMEs in developing countries are either not served or underserved by financial institutions.

In a new study titled ‘Micro, Small, and Medium Enterprise Finance: Improving Access to Finance for Women-owned Businesses in India’, undertaken by IFC in partnership with the government of Japan, it was estimated that of the total financing demand of $158 billion for women-owned businesses, formal sources are able to channel only $42 billion.

This, the study noted, left a significant gap of $116 billion that financial institutions could meet through products and services tailored for women entrepreneurs.

The study notes that there is sound empirical evidence, particularly from developed economies, that women borrowers have a stronger repayment history and present greater potential for cross-sales compared to male entrepreneurs, making them roughly twice as profitable for banks as a consumer segment.

“Access to financing is an important factor for women-owned businesses to become viable in today’s economic climate. This segment is a significant market opportunity for banks in India, and globally, as women entrepreneurs are proven to be excellent long-term clients for banks,'' said Jennifer Isern, IFC Manager for Access to Finance Advisory, in a statement.

The study recommends that banks can serve more women by lending to the services sector; about 80 per cent of women entrepreneurs run businesses focused on services.

Historically, banks have funded manufacturing enterprises, and relied heavily on collaterals to give credit, to the disadvantage of women-owned enterprises. Investing in women relationship managers, advisory desks at bank branches, and non-financial services and training would help promote women entrepreneurs holistically, the study has noted.

Related Topics