A new report hopes to shed a light on the sizable financing gap for women entrepreneurs in India.
The study, called the “Micro, Small, and Medium Enterprise Finance: Improving Access to Finance for Women-owned Businesses in India,” finds that financial institutions meet only 27 percent of the financing demand of India’s women-owned enterprises.
“Access to financing is an important factor for women-owned businesses to become viable in today’s economic climate,” said Jennifer Isern, manager for access to finance advisory at the World Bank’s IFC, which commissioned the report. “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.”
In general, women business owners have a stronger repayment history and represent greater potential for cross-selling compared with male entrepreneurs, making them roughly twice as profitable for banks as a consumer segment, the study notes.
The report, issued Tuesday, recommends that banks serve more women by focusing on the services sector. Historically, banks have lent to manufacturing companies, whereas about 80 percent of women entrepreneurs run service-based businesses.
But the report also notes other sizable obstacles, including that women borrowers often need support from a male family member to access credit. There is also a lack of female bank managers, which could make developing an ongoing business relationship with a female entrepreneur difficult, the report says.
Of course, lack of financing isn’t the only issue facing India’s entrepreneurs. Sexism remains rampant; see our related article, “Indian Women Are Changing With the Times. But Men?” And sexual intimidation and violence is a harsh reality as women begin to leave homes to work or start businesses.
As awareness grows, more resources are cropping up to help India’s women business owners. Earlier this month, IFC began a $600 million financing program for female entrepreneurs in emerging markets, saying that women are a vast untapped resource. Goldman Sachs is pledging $32 million toward the effort.