Empowering MSME Women Entrepreneurs through Enhanced Credit Access Spurs Economic Growth in India

May 22, 2023
Updated on

India is home to around 15 million Micro, Small and Medium Enterprises (MSMEs) run by women and over 70% of them are manufacturing enterprises. According to a report from Business World, the number of women-owned MSMEs in India has seen an unprecedented increase to 8.59 lakh units in the financial year 2022, with a staggering 75% jump from the previous year's 4.9 lakh units. This remarkable growth points to the potential of women entrepreneurs, who are breaking boundaries and expanding their businesses in all sectors. This definitely had a positive impact on the economy as a whole. 

However, Women-owned businesses in India have long been overlooked and underfunded, leaving them without access to credit and other necessary resources to grow their businesses. According to a report from International Finance Corporation (FIC), about 90% of the MSME women entrepreneurs in India have not availed formal credit and 95% of women-owned MSMEs are still in the micro-segment and 4% in the small and less than 1% in the medium. This indicates that the women-owned MSMEs micro sector has limited their ability to grow businesses and expand to the small or medium sector as they often lack the necessary collateral or financial literacy to access credit.

MSME women entrepreneurs have enormous potential and empowering them can lead India to become a more economically prosperous country. In recent years, there have been efforts to increase credit access for women-owned MSMEs. A significant strategy adopted by the Ministry of MSMEs was formalising the MSME sector by recognising more unrecognised MSME businesses. It helped many uncategorised industries to come together and access more resources. A report from the Indian Brand Equity Foundation (IBEF) states that despite having 432 million women of working age in India, around 94% of them come under the employed segment in the unorganised sector. 

Promoting ‘Nari Shakti’ or women empowerment has always been a priority for the Indian government. In a written statement to the Lok Sabha, the Union MSME Minister Narayan Rane mentioned that the registration of MSME women entrepreneurs had increased to more than 86% in FY22 from 75% in FY21. MSME women entrepreneurs registered in the Udyam Registration portal for MSMEs increased to 9,10,973 by FY22, a 75% increase YoY. This points out the improved growth journey of MSME women entrepreneurs in India. In this article, we will delve deeper into the positive impact of improved credit availability for MSME women owners in India on the nation's economy, as well as the various challenges faced by women entrepreneurs in the MSME sector.

Unleashing the Economic Potential of Indian Women Entrepreneurs Through Enhanced Credit Access

Improved credit availability to MSME women entrepreneurs had a tremendous impact on the Indian economy. It helped them to start and grow their businesses, creating jobs and stimulating economic growth. This had a direct impact on poverty reduction as well, as women are more likely to reinvest their earnings in their families, communities, and local economies. With increased access to credit, MSME women entrepreneurs got various opportunities such as digital technologies, e-commerce, and other innovations to take their businesses to the next level. This has allowed them to expand their reach, both domestically and internationally, and compete in new markets. This has also allowed them to increase their productivity and quality, leading to higher profits and growth. Furthermore, increased access to credit has also allowed MSME women entrepreneurs to improve their access to other financial services, such as insurance, savings, and investments. This has enabled them to diversify their sources of income further and build financial security.

Rural women are also said to be the torchbearers for social, economic, and environmental transformation for the ‘New India’. With 80% of them employed in the agricultural sector, investing in empowering rural women and mainstreaming them in the agricultural sector could have a significant impact on the nation's economic growth. This would create food and nutrition security, reduce poverty and hunger, and help India achieve the Sustainable Development Goals by 2030.

The Government of India has also taken steps to enhance the participation of women in MSMEs by introducing schemes like the Pradhan Mantri MUDRA Yojana (PMMY) and the Stand-Up India Scheme. These schemes have enabled women to access finance for setting up their own businesses. Despite these efforts, there is still a huge gender gap in the MSME sector in India.

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The Significant Gender Gap Experienced by MSME Women Entrepreneurs in India

Gender gap in the Indian MSME sector is a major issue that needs to be addressed. Despite the various encouraging initiatives taken by the Government of India to support women entrepreneurs through programs like the Mudra Loan for Women, the large gender gap persists. According to the Ministry of MSME, women comprise about  20.3% of MSMEs in India; however, the majority of them remain in the micro-sector and find it challenging to scale up to the small/medium enterprise level. This gender gap is reflective of the wider gender inequality that prevails in the Indian economy. The large gender gap experienced by MSME women entrepreneurs in India can be attributed to a number of factors. In India, women entrepreneurs are often subject to cultural and social constraints that limit their ability to access resources, opportunities, and capital. This is due to the traditional patriarchal mindset that exists in India, which often views women’s roles in society to be limited to domestic duties. This mindset is further perpetuated by the lack of support from family members and communities, which makes it difficult for women to take risks and pursue entrepreneurial endeavours. 

MSME women entrepreneurs also face challenges in accessing finance due to their lack of experience and business knowledge. This is due to the limited access to quality education and opportunities that are available to them. Furthermore, women are often less likely to receive loans from financial institutions due to their gender, which further limits their ability to start and expand their businesses. The current gender gap between male and female-owned MSMEs in India is an issue that needs to be addressed if the country wants to reach its full potential. The government needs to take further action to ensure that women entrepreneurs have access to the resources and capital that they need to succeed. This can be done by providing more educational and financial opportunities to women, as well as improving access to capital. 

In addition, the government should also work to create a supportive environment for female entrepreneurs by implementing policies that encourage gender equality and equal access to resources. With these initiatives, India can move towards a more equitable economy and bridge the gender gap between male and female-owned MSMEs. Despite India being the 3rd largest ecosystem for startups and the 3rd largest in the Unicorn community, the sad reality is that only 10% of them have female founders. This implies that the presence of women in the startup space is disproportionately low, and more needs to be done to support and uplift women entrepreneurs to grow their businesses as their counterparts.

Economic Empowerment of MSME Women Entrepreneurs in India

Economic empowerment of MSME women entrepreneurs in India is an important step towards achieving gender equality and women’s empowerment. The MSME sector is the largest employer of women in the country and thus, it is essential to provide adequate support to women entrepreneurs. To uplift the economic empowerment of MSME women entrepreneurs in India, it is vital to have women-centric and women-friendly policies, tax incentives, and significant interventions in place. This can facilitate easier access to banks and other financial institutions, enabling women to secure capital for their businesses and succeed. 

The Government of India has taken several initiatives to promote the economic empowerment of MSME women entrepreneurs. One such initiative is the Udyogini Scheme, which provides women entrepreneurs with training and capacity-building programmes, access to finance, mentoring, and support for marketing and innovation. Other schemes designed exclusively for MSME women owners are Annapurna Scheme, Pradhan Mantri Rozgar Yojana and the Dena Shakti Scheme. Additionally, the Government of India is also providing credit guarantee support to women MSMEs through the Credit Linked Capital Subsidy Scheme (CLCSS) and the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTSME). These schemes offer collateral-free loans to women entrepreneurs and provide them with access to working capital. 

Apart from Government initiatives, several non-governmental organisations (NGOs) are also working towards providing economic empowerment to women entrepreneurs. These NGOs provide a range of services, such as skill development, business incubation, market linkages, and financial literacy. They also provide mentorship and networking opportunities to women entrepreneurs. Furthermore, many private financial companies also provide resources, awareness and support to women through various products and programs. Ultimately, fostering an environment that encourages and nurtures female entrepreneurship, along with gender equality and women's empowerment, is an essential step towards achieving a more equitable, progressive, and sustainable world.

Conclusion

Increased credit access for MSME women entrepreneurs has a positive impact on the Indian economy as it creates an enabling environment which encourages women to take up and participate in economic activities. This helps bridge the gender gap and provides opportunities for sustainable and inclusive economic growth. Furthermore, it leads to the creation of new jobs, improved livelihoods and better access to financial services, which ultimately leads to social, political and economic empowerment of women. All these factors lead to a better, more equitable and prosperous India. 

Non-Banking Financial Companies (NBFCs) play a vital role in enabling women entrepreneurs in the MSME sector to access the necessary capital for their businesses. Unlike banks, NBFCs like Kinara Capital are not subject to stringent regulations and can offer quick and flexible business loans for MSME women entrepreneurs. This helps them fund their working capital needs, purchase equipment and stock, and expand operations. Kinara provides various financial services such as Working Capital Loans, Asset Purchase Loans and HerVikas Program, a Business Loan specially designed for MSME women entrepreneurs. Women-owned MSMEs can avail an interest rate discount of 1% on their loans without submitting any additional documents. 

Get a quick eligibility check on Kinara’s website or myKinara App and get one step closer to availing of a collateral-free business loan. MSMEs can also give a missed call at 080-68264454 to talk to our in-house customer support team and clear all their doubts.

FAQs

  1. How does increased access to credit help MSME women entrepreneurs?

Increased access to credit helps MSME women entrepreneurs by providing them with financial resources to invest in their businesses. This allows them to expand their operations, create more jobs, and increase their incomes.

  1. What are the benefits of empowering MSME women entrepreneurs?

Empowering MSME women entrepreneurs benefits individuals, communities and the economy. When they are empowered, they are more likely to start businesses, invest in their communities, and create a positive cycle of economic growth. 

  1. What has the Government of India done to empower MSME women entrepreneurs further? 

To further empower MSME women entrepreneurs, the Government of India has implemented several initiatives, such as providing them with access to finance, providing training and capacity-building programs, and providing them with access to technology and skills.

  1. What are the challenges of empowering MSME women entrepreneurs?

The challenges of empowering MSME women entrepreneurs include lack of access to credit, limited knowledge of business management, and cultural biases. Additionally, they may lack the necessary skills and the latest technology resources to succeed in their businesses.

  1. What is the role of the government in empowering MSME women entrepreneurs?

The role of the government in empowering MSME women entrepreneurs is to provide financial resources and support, as well as create policies and incentives to encourage their businesses. 

  1. How can MSME women entrepreneurs access government-backed loans and grants?

MSME women entrepreneurs can access government-backed loans and grants through various financial institutions, such as banks, NBFCs, and microfinance institutions. Additionally, they can take advantage of special schemes and programs designed to support women-owned businesses.

  1. What kind of incentives do MSME women entrepreneurs receive?

MSME women entrepreneurs receive various incentives, such as interest rate subsidies, tax credits, and grants. Additionally, they can take advantage of special schemes and programs designed to support women-owned businesses.

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