NPAs are 40 per cent lesser for women MSMEs, as per the public sector and IFC’s own data.

Credit and Finance for MSMEs: The finance gap for women-owned 15 million MSMEs, which are around 20 per cent of the 63-million MSME base in India, stands at $158 billion with 90 per cent of such women entrepreneurs relying on informal sources of financing, according to the International Finance Corporation’s (IFC) Qamar Saleem. However, the enormous financing opportunity hasn’t been tapped yet by financial institutions. Overall, as per World Bank estimates, the credit gap for Indian MSMEs is at $380 billion.

“There is a financial business case of targeting women entrepreneurs as a segment. We say that because first, there is a $158 billion financing opportunity for financial institutions to tap. Second, there is a critical mass as women-owned MSMEs are nearly more than conservatively 20 per cent of the population. Thirdly we see segment-solution possibilities when we see concentration (of women MSMEs) in few geographies,” said Saleem, Regional Manager Asia & Pacific, Financial Institutions Group, IFC citing data from an IFC report. He was speaking in a panel with speakers from the World Bank Group, MasterCard, etc., at the virtual Sankalp Global Summit 2021.

Importantly, 66 per cent of women-owned MSMEs don’t even have a bank account even as non-performing assets (NPAs) are 40 per cent lesser for women MSMEs, as per the public sector and IFC’s own data.

“They (women MSMEs) are actually a better risk profile. So, there is a clear business case for financial institutions to consider this as a market opportunity. They are concentrated in the informal space but we are also looking beyond informal — into micro enterprises,” added Saleem.

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The financing gap is largest for the women-owned ‘very small enterprises’ (WVSE) segment in India, which according to IFC, banks and microfinance institutions have been unable to address. “This is where we are seeing the new missing middle because that is the space where banks are unable to downscale and microfinance institutions are unable to upscale. This really is the space where a lot of opportunities exist. The way we have looked at it (segment) is loan sizes between $1,000 to $15,000 (are required),” said Saleem. In fact, for the estimated 2.7 million WVSEs in India, the estimated aggregate credit demand is $11.4 billion.

WVSEs in India have less than 20 employees while turnover ranges from Rs 10 lakh to 50 lakh, as per the IFC report cited by Saleem. Moreover, more than 70 per cent WVSEs are engaged in seven activities viz., textiles manufacturing and wearing apparel, handicrafts manufacturing, food and grocery retail, jewellery and accessories retail, beauty salons and personal services, and eateries.

“Overall policy environment and ecosystem somehow has been reluctant to recognise (women entrepreneurs) because maybe of their informality to address them as potential customers. There have been a lot of issues related to formalising them (and) there have been very few players who have taken the risk to serve this segment of customers,” Samik Sundar Das, Senior Rural Development Specialist, World Bank Group.

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Moreover, the pandemic also had an adverse impact on women entrepreneurs. Since most women entrepreneurs rely on their families for financial support, they have found it challenging to sustain and scale their ventures amid reduced household income as a result of the pandemic, the report noted. On the other hand, the time given by women entrepreneurs to their businesses was also reduced following Covid as the domestic workload for them went up.

“An inextricable link needs to be created between skilling of a women entrepreneur, whether that’s business development skilling or whether that’s overcoming bias they might be facing in their community and her access to financial services. This access has to be a part and parcel of the solution,” said Alison L. Eskesen, Vice President, Centre for Inclusive Growth, MasterCard.