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2014-03-19

Financing gap for women entrepreneurs in India: IFC

Financial institutions meet only 27 per cent of the financing demand of women-owned micro, small and medium enterprises in India, a study by IFC has found.

Financial institutions meet only 27 per cent of the financing demand of women-owned micro, small and medium enterprises in India, a study by IFC has found.

 

The study, undertaken by IFC in partnership with the Government of Japan, estimates that of the total financing demand by women-owned businesses are $158 billion (Rs 8.68 trillion) and formal sources are able to channel only $42 billion (Rs 2.31 trillion). This leaves a significant gap of $116 billion (Rs 6.42 trillion).

 

There are an estimated 3 million women-owned enterprises across industries, representing about 10 per cent of all micro, small, and medium enterprises in India and employing over 8 million people, the study reports.

 

The study notes that there is sound empirical evidence, particularly from developed economies, that woman borrowers have stronger repayment history and present greater potential for cross sales compared to male entrepreneurs, making them roughly twice as profitable for banks as a consumer segment. 

 

The study recommends that banks can serve more women by lending to the services sector; about 80 per cent of women entrepreneurs run businesses focused on services. Historically, banks have funded manufacturing enterprises, and relied heavily on collaterals to give credit, to the disadvantage of women-owned enterprises. 

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