[ad_1]
In India, most women-owned businesses in the MSME sector are in the ‘micro’ category and less than 3 per cent of them ever scale up to the ‘medium’ category, said Hardika Shah, Founder and Chief Executive Officer (CEO), Kinara Capital in an interview with BW Businessworld.
Shah said that there is much research and data that still shows that women-owned enterprises in India face more than their share of socio-economic hurdles.
Here are edited excerpts:
What according to you is the current status of women-led MSMEs in India?
There is a higher number of women entrepreneurs in the MSME sector than overall in the country. Across India, women-owned businesses make up less than 15 per cent while there are over 20 per cent of women-owned MSMEs.
There has also been a favourable turn with the number of women-owned MSMEs taking the formalisation route on the rise. According to data from the Ministry of MSMEs, the number of women-led MSMEs registered on the Udyam registration Portal has witnessed a substantial increase of 75 per cent in 2021-22.
This has opened the door for access to credit reports showing that the MSME industry in India has a higher share of women’s participation than the rest of the labour force. All of these factors bode well for women-owned MSMEs in the country, as they point to an inevitable breaking down of gender-based discrimination and boundaries that have historically prevented women from becoming successful business owners.
However, we are still far away from reaching gender parity in the MSME sector. Most women-owned businesses in the MSME sector are in the ‘micro’ category and less than 3 per cent of them ever scale up to the ‘medium’ category.
The data is also available that still shows that women-owned enterprises in India face more than their share of socio-economic hurdles. Perhaps the most significant of these is that of social bias, closely followed by a vast financing gap.
According to a study by the International Finance Corporation, 70 per cent of women-owned MSMEs in India face a credit gap. This can largely be attributed to the fact that women are often looked upon as less than capable of launching and running successful businesses, owing to social biases. There is also the issue of the overrepresentation of women entrepreneurs in traditional sectors which yield low revenue and have limited growth potential.
There is certainly a gap in the credit space when it comes to women-led MSMEs, which needs to be addressed for them to be able to reach their full potential. It’s important to note that women entrepreneurs make way for more women to enter the workforce by employing them in their businesses. They also affect generational change in their communities by prioritising health, education, and gender equity. There is a very important case to be made, therefore, for women entrepreneurs to getting their share of support in terms of policy, capital, and social sanction.
The MSME sector has recorded a relatively higher rate of women participation in the workforce (24 per cent) compared to other industries, as per the CIEL HR report. Do you think it’s enough or do we have a long way to go?
Even with the increase in participation, I certainly don’t consider the skewed ratio as ‘enough’. India has always had a deplorably low rate of women’s participation in the workforce, evidenced by the fact that In the last three decades, women’s formal labour participation fell to 20 per cent from around 25 per cent in 1990.
Considering these facts, while the increase in the participation of women in the MSME sector is certainly a very good sign, I would say there is still a long way to go.
Do you think getting funding for women-led MSMEs businesses In India is difficult? If yes, how can we fix it?
There are several major hurdles for women-led MSMEs in India to get the funding they need to advance their businesses and reach their potential.
For instance, according to a World Bank report, women entrepreneurs in India face a rejection rate of 16 per cent, which is double the rate of rejection faced by their male counterparts at 8 per cent.
This alarming disparity is a testament to how much more difficult it is for women entrepreneurs in India to access funding.
According to a report by the International Monetary Fund (IMF), access to credit is the main hurdle stopping women from expanding their businesses and women-owned enterprises often endure the bias of receiving a smaller loan amount for a shorter tenor vs a similar male-owned business.
One major way to fix this is to use technology to drive credit decisioning based on data. In doing so, the human bias is removed from the process and we make a systemic shift towards evaluating a business on its merit.
Another way to address this is for NBFCs to also participate in providing incentives or schemes to empower more women business owners to apply for formal credit. In addition, multi-pronged efforts need to be made by the government, banks, and private lenders to raise awareness about the benefits of accessing formal credit, financial literacy, and business management.
How can we increase women’s access to formal credit that can result in higher female entrepreneurship and boost India’s economic output?
There is a need for women-oriented financial products in the MSME lending market. When it comes to accessing financial services, women face several additional challenges compared to their male counterparts which restrict their ability to grow their businesses at the same pace.
One major issue is societal bias against women in the workforce. The lack of confidence in women successfully starting and running businesses often gets in the way of lenders extending credit to them. This can be remedied with more automation-driven processes to eliminate human bias, as well as sensitisation and awareness drives.
In addition to this, women are often deprived of formal credit access due to the fact that most of them don’t own assets to leverage as collateral. The solution to this is to offer collateral-free loan options so that they can have access to capital streams.
The third hurdle is accessibility. Language barriers and daunting amounts of documentation can put women off the idea of formal credit, as can time-consuming processes that require them to physically visit the lender’s office or branch. The solution is to provide doorstep customer service, digital accessibility, simplified processes with minimal documentation, and support in vernacular languages.
What are the major changes you witnessed in the post-Covid-19 pandemic, as far as businesses are concerned?
We witnessed many of our MSME customers pivot their businesses to survive the fallout of the economic downturn precipitated by the Covid-19 pandemic. With capital support, they were able to make a quick turnaround, and the vast majority got right back on the growth path. This adaptability, while not totally unexpected given the resilience of small businesses, did come as a pleasant surprise to us.
We have seen small business entrepreneurs become extremely tech-savvy and open to transacting online. The tech transformation had resulted in a certain degree of adoption among our customers, but in the wake of the pandemic, we saw nearly all of them become open to getting online.
Especially in tier two and tier three cities, a lot of business transactions with vendors and customers moved to digital payments for MSMEs and so did digital marketing. Whatsapp is the top choice for MSMEs to promote their products.
The way businesses operate has changed unequivocally. Businesses in general have become more agile and adaptable to keep up with the fast-changing landscape. This willingness to adapt and move forward is remarkable to the resilient MSME sector in India.
How can SMEs become the main drivers of the country’s growth post-Covid-19 and can contribute to India’s developed nation journey by 2047?
In my opinion, SMEs have always been one of the main drivers of the Indian economy. The 63 million MSMEs in India account for close to 30 per cent of the country’s gross domestic product (GDP), and 50 per cent of India’s exports, and employ over 130 million people.
The Indian MSME sector is considered the backbone of the economy. The growth and expansion of the sector will be a major contributor to making India into a USD 5 trillion economy. The sector has been witnessing double-digit growth and holds a vast amount of untapped potential.
While the sector will undoubtedly have a significant role to play in India’s journey to USD 5 trillion, just how well it performs this role will rely on various factors. A lot depends on how well-supported MSMEs are and whether they are being facilitated to fulfill their true potential.
At the moment, the sector suffers from a vast credit gap valued at close to USD 400 billion by the World Bank. There are also formalisation hurdles that plague MSMEs. These issues need to be addressed in order to accelerate the ability of small businesses to contribute to the USD 5 trillion economy goal.
[ad_2]
Source link