Unleashing the Power of Women-led MSMEs

There is abundant talk of tapping the demographic dividend' that could take India to a higher level of sustainable growth.

Typically, this term is merely used to refer to the potential of the country's youth. But there is one more Indian demographic which lies untapped - women. Within the large and growing universe of MSMEs in India, there is immense scope and potential for greater contribution from women-led MSMEs.

According to Statista, in FY2021, women-owned a little over 20% of all MS of micro-businesses within business sizes, with more enterprises in rural areas than urban parts of the country during that financial year.

Hurdles on the Path

There are various economic and socio-cultural factors that constrain women-led MSMES. In terms of economic constraints, the top three factors are typically securing timely and adequate capital to run and grow their businesses, managing business operations, and securing reasonable credit days from vendors/suppliers. IFC states that when it comes to access to credit, the financing gap is the largest for the women-owned 'very small enterprises' (WVSE) segment in India, which even banks and microfinance institutions have been unable to address.

Many women entrepreneurs are keen to approach banks and formal financial institutions for their funding needs. However, they are unable to benefit from capital and lines of credit due to the absence of credit history and a lack of acceptable collateral. More pertinent than the lack of credit access is the awareness about existing credit available from both government and non-government sources. While this is a common challenge for both men and women entrepreneurs, in the case of the latter, the finance gap is to the extent of $158 billion, according to IFC. As a result, around 90% of such women turn to informal sources of financing, which handicaps their ventures severely.