Making finance easy for women entrepreneurs

Lutfa Begum is a resident of Kodalkathi village in the Jalpaiguri district of West Bengal. A few years back, she was a housewife and her husband was a daily wage earner in a factory. Her husband was the sole earning member, and being a daily wage labourer, his income was uncertain. Lutfa and her family were living in severe poverty, barely able to make ends meet.

But determined to change her situation and that of her family, in 2007 Lutfa took a microloan of Rs. 6,000 from Bandhan to start a small hardware shop in her village. Through her sheer dedication and hard work, the hardware store started doing well. Over the years, she kept repaying her loan and availed fresh credit to expand her business. At present, she is the owner of a brick-making factory and provides employment to three more people. She aspires to expand her factory and employ more people. Lutfa and her family have moved into a two-storeyed house in her village and her children are enrolled in a good school.

Lutfa’s story is symbolic of the entrepreneurial spirit and hardworking nature of women who want to shape their own destiny by turning to entrepreneurship, and live a life of dignity and financial independence. All that they need is someone willing to listen and extend a helping hand.

For India to become a $5 trillion economy, it needs to catalyse women entrepreneurship, especially at the bottom of the economic pyramid, where job opportunities are hard to come by. And the only way to do that is to provide aspiring women entrepreneurs with timely access to formal finance, to start and grow their ventures.

According to a working paper of the International Monetary Fund (IMF), women entrepreneurs contribute 17% to India’s GDP and further measures to close the gender gap in the country – through improved access to finance and labour market reforms – can help add another 6.8% to the GDP.

Another report authored by Google and Bain & Company estimates that women owned around 15.7 million business units, or roughly 20% of all enterprises in India – mostly MSMEs and agri-businesses.

The same report states that women entrepreneurs can help create 17 crore jobs by 2030. Over the next decade, India is expected to have the largest working-age population in the world with over 100 crore people. It is critical for the country to empower women entrepreneurs and women participation in the workforce to find gainful employment for the youth of the country.

According to World Bank data, the percentage of women in the labour force in India stood at a little under 20% in 2020, versus close to 40% for the world. In this context, access to capital and the promotion of women entrepreneurs can help India leverage its demographic dividend, in the way that it is meant to be.

I have witnessed how poor families that build a sustainable livelihood for themselves and secure their future are strongly influenced by the women in the family. The income of a poor household is always less than its needs; and the women of such households are highly skilled in managing the family’s limited resources optimally.

Contrary to common perception, lending to these women entrepreneurs, to help unleash their spirit of enterprise, is a commercially viable proposition and the need of the hour. In Bandhan Bank’s own experience, its over 1.7 crore borrowers have successfully leveraged formal credit to start and grow their businesses and provide jobs to other women in the process. These people have also managed to break free from the clutches of informal moneylenders who charge exorbitant interest and ensure that their borrowers are always in the cycle of debt and poverty.

This is the reason behind microcredit’s success in India. That’s why the total outstanding loan portfolio under microfinance has reached Rs. 2.53 lakh crore in India in FY21, growing at a CAGR of close to 27% over the last decade. According to the National Council for Applied Economic Research, around 2% of India’s GVA (Gross Value Added) is on account of microfinance, and this is set to rise further in the years to come.

While a lot has been done to champion women entrepreneurship in the country in the last two decades, a lot more remains to be done. We need several more financial institutions focussed on lending to these budding entrepreneurs, without insisting on guarantors or collateral. Lenders can evolve business models where alternate data points such as business receipts and cash flows should be prioritised while deciding whether a borrower is creditworthy or not.

The penetration of bank branches in rural and semi-urban areas needs to be augmented, along with greater access to digital banking channels. While two-thirds of India’s population lives in rural areas, only 11% of bank branches are situated here. Also, active microcredit borrowers represent just 4.3% of India’s population, indicating the huge scope for growth in the future.

Lastly, imparting financial and digital literacy to women is essential to truly empower them to chase their dreams. It isn’t enough to just give these women credit; they need to be also taught how to operate a bank account, how to use net banking and mobile banking, and how to purchase other financial products like affordable housing loan, life insurance etc. to secure their future.

The world that we live in is increasingly going digital, and the digital adoption and scaling up has only accelerated during the pandemic. Women, especially those residing in rural and semi-urban areas, will definitely feel more confident and empowered if they are well-versed with these latest digital trends.

While it is encouraging to see the success stories of women entrepreneurs from urban centres like Delhi and Mumbai find place in public consciousness; the success stories of these small, invisible entrepreneurs like Lutfa – and millions like her – often go unnoticed. The inspirational stories of the difference that these entrepreneurs are making on the ground, with a little help from all of us, deserve pride of place in our discourse as well.



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