Why are there fewer female entrepreneurs in India?
Women entrepreneurs face the following additional barriers due to a pronounced gender disparity in the male-dominated society.
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- Access to Finance
The issue of lack of finance for females entrepreneurs is multi-faceted due to inherent gender bias and social attitude. Indian lending institutions consider women entrepreneurs as high-risk borrowers due to manifesting age-old stereotypes into behavior leading to difficulties in getting business loans for women in India. A simple example would be the hesitancy in providing loans for females to start a business in India.
Second, a majority of Indian women do not own property due to skewed inheritance structure. This eliminates the chances of collateral availability for availing loans. Moreover, around 95% of female-owned MSMEs are not registered, further thinning the chances of business loans for women in India. Even for the registered ones, Indian women faced more rejections while availing of loans. Also, numerous bank visits lead to a longer wait for credit for female entrepreneurs.
As a result, around 70% of the financial requirement of female entrepreneurs is still unmet as banks are not providing enough business loans for women in India.
- Lack of Awareness about Specific Instruments and Red-Tapism
The lack of knowledge about financial schemes translates into financial difficulties for women entrepreneurs. A survey by International Financial Corporation suggests that a mere 17% of Indian women entrepreneurs knew about the financial schemes launched by the government or other financial institutions. Further, a majority of this 17% were unclear about the point of access and relevance of the schemes providing MSME loans for women. The same is true for MSME loans for females and other such incentives that women entrepreneurs don’t know about.
For example, the Prime Minister Employment Generation Programme provides added incentives for women-owned micro-enterprises. The scheme allows women to deposit just 5% of the initial capital making it easy for them to pay back. However, the number of women beneficiaries under the scheme have been dropping significantly during the past few years. Also, due to red-tapism, the funds meant for small business loans and subsidies are usually stuck.
- Lack of family Support and Child Care
The gender stereotypes and social norms expect women to look after their homes. It doesn’t matter if they are handling a huge enterprise or venturing into a startup. Juggling between home and businesses gets more challenging when they don’t get the much-needed family support. More often than not, a working woman is considered selfish.
The social programming from childhood that the ABC of businesses is not something a woman can understand adds to these factors. This systemic bias against businesswomen is deep-rooted and exists at almost every front, be it family, police officials, lending institutions, or bureaucracy. On one hand, families rarely support the women to begin their own start-ups, banks hesitate from providing business loans for women in India. It would be safe to say that “Being a Woman” is the greatest hindrance for female entrepreneurs.
Now, let us see why India needs more women entrepreneurs.
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Why India Must Focus on female Entrepreneurs?
As per “Closing Gender Gaps in India: Does Increase female’s Access to Finance Help?”, a working paper of IMF, around 6.8% increase in output can be achieved by initiating measures such as better access to finance, reduced labor market rigidities, formalization of the business sector, and skill development.
Moreover, in a 2015 study by McKinsey named, “The Power of Parity: Advancing Women’s Equality in India”, India’s economy can be advanced by around USD 0.7 trillion by 2025 by advancing gender equality in India. Research shows that women-owned businesses in India hire more employees, especially women workers. This positive feedback mechanism is another big reason why India needs to focus on its women entrepreneurs. Second, studies show that female-owned firms show a better tendency towards adopting digital technologies yielding them more profits.
What does the data say about female-owned firms in India?
India ranked at 108th spot out of a total of 144 nations assessed under the Global Gender Gap Report by the World Economic Forum. What makes the situation even worse is that India saw a fall in rank to 139 on the economic participation indicator. For India, gender disparities are directly translated into reduced economic productivity. Second, the schemes and policy initiatives are taken on the assumption that the small scale businesses for women will show scalability organically. The key factors behind the lack of female entrepreneurs range from less availability of loans for female to start a business in India, inadequate infrastructural facilities, little to no family support to low literacy rates.
- Women own around 40% of the total informal manufacturing companies in India.
- On the contrary, just 9% of service enterprises in India are female-owned.
- According to the 6th economic census of MoSPI, out of 58.5 million businesses, around 8.05% million were women-owned. Thus, out of all the entrepreneurs in India, a mere 13% are women.
- As per the Index of females Entrepreneurs, India’s 52nd ranking out of a total of 57 countries is saddening. Few female owner firms lead to low female labor force participation rates. This is why female labor force participation in India reduced to 26% in 2018. The reduction was seen in the background of high GDP growth rates and a higher working-age female population.
However, during the last few years, female entrepreneurs are catching up as shown by the growth of manufacturing enterprises and startups owned by women.
How India can Bring females on Entrepreneurship Wagon?
Fostering entrepreneurship among Indian females is the sure-shot way to enhance the country’s wealth and bring financial independence for females. In the 21st century, women are equipped with a willingness to take up tasks that were considered the men’s business before. It is high time that we initiate programmes to transform small scale business for women and entrepreneurship with business traits. Indian women should be equipped with innovative skills to keep up with the trends. By harnessing their potential, India can become competent to strive for excellence in the startup and enterprise arena.
For this to come true, the government needs to consider women as a specific target for developmental schemes. Second, the government should work on providing small business loans for women. Business loans for female in India and enhanced educational facilities are imperative to provide a headstart for Indian female entrepreneurs. Moreover, we also need better training and skill-development programmes on business management for females.
Written by,
Prasad P. Patkar