Think about some of India’s most successful female-led start-ups -- Nykaa by Falguni Nayar, MamaEarth by Ghazal Alagh and Zivame by Richa Kar. At the heart of the inception of these companies, was the drive to do something unique, to plug a gap in the market for women audiences and buyers. Across the world as well, women entrepreneurs increasingly delve into markets that are geared towards practical solutions at the micro-level. However, there remains one key hurdle in this quest: financing and the gender gap in access to credit. And this, in turn, impacts growth and scalability.
According to a report by the Observer Research Foundation, 90 per cent of women entrepreneurs in India still rely on informal sources of financing. Further, self-financing is how 58 per cent of female entrepreneurs between the ages of 20 and 30 started their businesses. The All India Debt and Investment Survey showed that 80.7 per cent of women in rural India and 81.3 per cent in urban India had deposits in banks, but these had not translated into access to loans.
McKinsey & Company published key findings in a study, “Female founders are the driving forces behind startups that address maternal health, menstrual health, fertility, menopause and contraception. Research has shown that when inventors set out to solve a health problem, male inventors are more likely to solve for a male-oriented condition; women-led teams solve for both… Increasing female representation among researchers, inventors, investors, and founders can create more consumer-centric products and solutions that recognise and target women’s specific healthcare needs… Because women are not just consumers, but the primary healthcare decision-makers for themselves and often for their families as well, and so better health outcomes for women can lead to better outcomes for society.’
Bengaluru-based Chandralekha Rao, who works in a public sector bank, says that the government does have provisions for women entrepreneurs. “The Women Entrepreneurship Platform is about five years old and calls itself ‘an ecosystem’ that brings women entrepreneurs from across India through three pillars – Iccha Shakti (motivating and inspiring), Gyaan Shakti (knowledge), and Karma Shakti (support in starting or scaling up). Part of this process also involves funding and directing women towards the various schemes that are available, depending on their socio-geographic and economic background, nature of business, and so on. The Women Enterprise Development scheme for women from North-Eastern India is a classic example, offering funding, incubation, and acceleration to women aged 18-50.
“The Ministry of Finance has also launched the Stand Up India scheme for scheduled castes and tribes, and women entrepreneurs, facilitating bank loans between ₹10,00,000 and ₹1 crore. The Cent Kalyani scheme is offered to MSME businesses led by women, in the manufacturing or service sectors, such as handloom and handicraft workers, doctors, chartered accountants, beauticians, dieticians, tailors, typists, photocopy booth operators, and so on. Loans can be borrowed in two categories – up to ₹10,00,000 or between ₹10,00,000 and ₹1 crore. The Pradhan Mantri Mudra Yojana is also a great tool for micro and small businesses, providing collateral-free loans up to ₹10,00,000.”
It is bittersweet to note that a majority of the Pradhan Mantri Mudra Yojana takers have been women. Although this access to credit has made it possible for some of them to chase their dreams, these have been relatively smaller numbers – 88 per cent in the category of up to ₹50,000, as opposed to the higher category of loans. This perception that the needs of women’s businesses are smaller and more restricted, can only be changed once there is absolute financial inclusion and equal access to banking decisions.
On the upside, a study conducted by market intelligence platform Tracxn, and published by Mint, suggested that funding into women’s start-ups in India has increased to 16 per cent in 2022, from 11 per cent in 2021. Women entrepreneurs in Bengaluru raised $11.3 billion through 1404 fundraising rounds, followed by Delhi NCR at $5.7 billion via 1271 rounds and Mumbai at $3.5 billion with 960 rounds. Interestingly, even in the early stages of funding, women-led startups have performed significantly better, with a 76 per cent year-on-year increase. The report also noted that almost 60 per cent of all unicorn startups had women at the helm in 2021 and 2022 - 5ire, Mama Earth, ACKO, Mobikwik, and Amagi.
“I would recommend the Stree Shakti Package offered by SBI for women entrepreneurs,” says Bhamni Raman, a loans advisor in a Non-Banking Financial Institution (NBFI). “Any woman who owns at least 51 per cent of the business is entitled to take this loan. Those in retail, manufacturing and services can avail the package, as well as professionals like doctors or architects who wish to set up their own practice. There are different brackets based on the profession, but broadly, the loans range from ₹50,000 to ₹25 lakhs. Punjab National Bank offers loans of up to ₹10,00,000 under the Mahila Udyam Nidhi Scheme for small-scale industries by women entrepreneurs. If there is a group of 10-20 women working together, a good scheme offered by a private bank is ICICI’s Self Help Group-Bank Linkage Programme, for 20 women who are engaged in any profit-making activity together.”
Women across the board want to be independent and often hesitate to seek help. This personality trait often extends to their work and finances as well. The good news is, you needn’t dip into your life savings, Provident Fund or mortgage your jewellery to start a business. Access to credit allows you to focus on growth and acceleration, to raise your credit scores, and avail tax benefits, while keeping your personal assets secure. Financial independence is just a loan away.