Finance

women entrepreneurs: Data collection might be the key to access to finance for women entrepreneurs

While there are multiple studies and schemes that are focused on improving access to credit for women entrepreneurs, these projects have taken place in silos. Due to this asymmetry, there is a need for the government and banks and financial Institutions to collaborate and design a cohesive and comprehensive program that offers a data-led approach to solve the challenges associated with access to finance in India, especially for women. Further, the research from previous existing studies, supplemented with data collected by local, State and National-level authorities can inform and optimise interventions to improve financial access in the country.

The problem of siloed databanks

The 2022 Mastercard Index of Women Entrepreneurs showed that India is amongst the lowest-ranked countries in the world for women’s entrepreneurship. Especially in the post-pandemic period, it is more pressing than ever to collate and analyse data regarding women entrepreneurship. According to recent reports from the World Bank and several other organisations, women-owned businesses were severely impacted during the pandemic. Factors such as personal challenges, including significantly greater at-home care responsibilities, posed as a major obstacle in women running their businesses. The lack of comprehensive data on the financial performance of women-owned businesses, especially in the MSME segment, has also deemed them to be perceived as high risk, which impacts their creditworthiness. In a recent survey by ICRIER and NABARD, it was found that 60.5% of MSME owners find credit access difficult. Further, 47.7% of owners stated it was tougher to get a loan as a woman due to the existing gender bias.

Women’s contribution to the Indian economy is poorly measured with limited indicators in dated surveys that cannot accurately inform decision-making. Even fewer nationally representative datasets exist that have tracked the performance of different types of women-owned enterprises across states. Financial institutions require the creation of a support structure that allows them to positively evaluate the credit risk profile of women-led enterprises.

Despite existing scorecards like the Female Entrepreneurship Index by Global Entrepreneurship and Development Institute, there is limited insight into intra-country differences in policy, the entrepreneurial ecosystem and the business capacity of entrepreneurs. As a result of these measurement gaps, there is no existing method that evaluates and addresses the gaps in the Indian entrepreneurship ecosystem for women.

Gaps in existing policies

Furthermore, the existing schemes do not have a customised approach that reflects the needs of rural women entrepreneurs. The statistics from the All India Debt and Investment Survey in 2019 showed the number of women holding bank deposits is rapidly growing, with 80.7% of women in rural India and 81.3% in urban India having deposits in banks. However, this has not resulted in access to credit.

Traditionally, policies for financial inclusion in India focused on the significance of savings over access to credit. Today, there is a need to provide women access to capital through alternate means and change the perception of risk coverage in rural areas. While there are adequate funds being made available through various schemes, there is a need for a robust credit enhancement mechanism to provide loans to women entrepreneurs. For example, strategic collaborations between the banks and financial Institutions and the National Rural Livelihood Mission (NRLM) authorities can establish the right credit evaluation techniques and tools to financial institutions, which can in turn help disburse loans to women entrepreneurs across the nation.

This can only be achieved through greater visibility into women-led businesses and then addressing barriers with specialised financial products.

Streamlining future data collection

Cohesive quantitative and qualitative data on the typology (in terms of turnover, investment, sector, geography, etc) of women entrepreneurs and their credit needs will help in designing a robust and future-proof program for the financial empowerment of women entrepreneurs. In this endeavor, both qualitative and quantitative data – credit asks, business cash flow cycles, moveable assets, and financial footprint, for credit enhancement mechanisms and assessment tools will be essential in overcoming the inherent barriers found in the entrepreneurial ecosystem.

Learnings from the success of past credit enhancement pilots need to be organised before insights can be used to inform interventions. Several pilot studies have been initiated by financial institutions such as Mann Deshi, BASIC, MFIs and fintech firms like Centrum, Aye Finance and RedCarpet to name a few, that have looked at CIBIL-like ratings and property while evaluating credit proposals. Importantly, the results of these projects are neither documented nor made readily available to inform future frameworks. These learnings have also not yet been communicated to public sector banks to create a comprehensive mechanism that brings processes, technology, and people together. Doing so will allow the use of reliable and relevant data in the decision-making process for credit lending to women entrepreneurs.

Going forward, it is imperative to establish a mechanism and institutionalise a process for systematic data collection and assessment. Furthermore, the facilitation of partnerships between financial institutions and policymakers, for research to be communicated and transformed into meaningful frameworks, is very important. Such implementations are not possible without the aid of political will. The government is strongly pushing for digital adoption, working to create comprehensive data infrastructure and platforms for ease of doing business, such as the National Data Analytics Platform (NDAP) which is a step towards real-time monitoring and quality data collection.

Data-enabled policymaking and program creation are the starting point to unlocking the immense economic potential of women entrepreneurs in the country.

The writer is Co-Founder, Global Alliance for Mass Entrepreneurship (GAME)

ETRise MSME Day 2022 Mega Conclave with Industry Leaders. Watch Now.

Leave a Reply

Your email address will not be published.

Back to top button