Engendering Fintech lending to power women’s entrepreneurship

Self-employment or entrepreneurship is amongst the most important sources of employment for women across India, with nearly three-fourths of women across the country depending on their own businesses for survival. Having said that, women-led enterprises in India are more likely to be informal, nano enterprises employing a few workers and concentrated in traditional low-growth, low-productivity sectors. These enterprises are a far cry from the technology-driven, male-led start-ups striving to become unicorns and attract the interest of global investors.

One of the biggest consequences of this widespread informality and sectoral concentration of women-led enterprises is that it results in barriers to accessing formal channels of finance. As formal institutions rely on credit history and collateral to assess creditworthiness, women entrepreneurs are disadvantaged due to limited land ownership and the inability to network and develop banking relationships.

In India, a financing gap of nearly US $20.5 billion persists for women-led enterprises. Despite having higher profit margins than male-owned enterprises—31 percent vs. 19 percent—they face double the rejection rate—19 percent vs. 8 percent—and receive only 5 percent of total lending for micro, small and medium enterprises (MSMEs) from the public sector banks.

 

One of the biggest consequences of this widespread informality and sectoral concentration of women-led enterprises is that it results in barriers to accessing formal channels of finance.

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Source: Engendering Fintech lending to power women’s entrepreneurship | ORF (orfonline.org)