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Fostering women entrepreneurship in rural India through financial inclusion

RBL Bank Nov 26, 2019

“You can tell the condition of a nation by looking at the status of its women” - Jawaharlal Nehru.

The empowerment of women is essential for achieving the objective of inclusive, equitable and sustainable development and economic growth in any nation. While, over the last few decades, India has propelled itself to become one of the fastest-growing economies in the world, the participation of women in the country’s economic activities remains well below their potential contribution. Given the fact that the participation of women in rural development is one of the key drivers of economic growth of a country, it is important to increase female participation not just as job seekers but also as job givers.

Even though the emergence of women entrepreneurs, especially in rural areas, and their contribution to the national economy has grown over time, they continue to be a largely untapped source of economic growth. Despite accounting for nearly half of the country’s population, women make up for less than 14% of the total entrepreneurship in India, according to the Sixth Economic Survey. While nearly two-thirds of the establishments owned by women are situated in rural areas, their share in rural entrepreneurship stands at just 9%, indicating the massive headroom for promoting female businesses and driving inclusive growth in the economy. For a country where almost 70% of the population lives in the villages and the hinterlands, increase in women entrepreneurship can result in the creation of job opportunities, betterment in the standard of living, income generation and improvement of social and economic life in such areas.

However, despite the massive upsides of promoting women entrepreneurship in rural areas, its expansion continues to be hindered by a host of social and economic factors. Moreover, most women-owned establishments are concentrated in MSME (micro, small and medium enterprise) sector, which is characterised by limited growth and generally tend to be home-based. Their role in the large-scale and technology-based high growth industries is still quite limited. Many research studies point out that - along with social factors like family obligations, lack of education and gender discrimination - one of the major factors restricting the growth of women enterprises in India is the lack of access to financial services. According to the aforementioned Economic Survey, almost 79% of the women-run establishments were self-financed, while only 1.1% of them received funding from banks or other financial institutions. Among the various factors which restrict women’s access to formal credit, the lack of collateral for borrowing is the major one as India still remains a patriarchal society where asset-ownership is heavily skewed in favour of men. In addition to that, the absence of credit ratings, lack of expertise to create technically- and commercially-viable business plans, a general lack of experience and exposure and heavy paperwork associated with accessing credit also restricts women from venturing out and dealing with banking institutions. Consequently, most women are forced to fund their entrepreneurial ventures on their own or through high-cost informal sources, which restricts the growth and threatens the survival of their enterprises.

So, what can be done to spur the growth in women entrepreneurship in India? The most obvious steps include developing infrastructure facilities in villages, providing vocational and managerial training programs and removing socio-cultural barriers that stand in the way of empowerment of rural women. However, these steps cannot lead to a rise in entrepreneurial activity among women unless they are also made of a part of the formal economy. In this context, while the government’s financial inclusion drive has led to a substantial increase in the number of women with a bank account, there is still an unfavourable gender gap in account ownership and account activity remains moderate. The government, as well as the financial services sector, needs to take focussed steps to drive financial inclusion and awareness amongst women. This will also help women bridge the even-larger gender disparity in access to formal credit markets. In addition to this, one of the major hurdles women face is raising startup capital due to their inability to provide loan guarantees. At RBL Bank, with a view to empower such ambitious women, we offer a variety of products such as the Unsecured Small Business Loans of up to Rs. 10 Lakh and short-term Business Loans of up to Rs. 35 Lakhs without any collateral or security. Loan products like these can help women not only start their entrepreneurial journey but also meet their capex and working capital requirements. In developing countries like India, women entrepreneurs have the potential to become the rising stars who drive economic growth and bring prosperity and welfare in society - all we need to do is to enable them to dream.

Disclaimer: Articles published on the website are merely indicative and suggestive in nature and do not amount to solicitation. The contents do not guarantee the desired returns and/or results. Reader is advised to exercise discretion and consult independent advisors for achieving desired result. Visitors to this blog/ website w.r.t products & services offered by RBL Bank Limited herein, shall ensure that the comments / feedback posted shall be restricted to the contents published herein and shall not contain such language that may be un-parliamentary or against any religion, caste, section of society, political view etc. While our endeavor is to publish the comments that are submitted, however, all comments/feedback shall be subject to internal review by RBL Bank Limited. We do not guarantee that the comments that are submitted will be published.

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