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Women-backed small businesses face $11.4 bn unmet credit demand: IFC report

By Kaushiki Chatterjee

  • 08 Mar 2022
Women-backed small businesses face $11.4 bn unmet credit demand: IFC report
Credit: 123RF.com

India’s women-owned very small businesses (WVSEs), which are credit-starved, need an estimated capital worth Rs 83,600 crore ($11.4 billion) with support from strong financial institutions, says a report by International Finance Corporation (IFC), the private investment arm of the World Bank.

The report titled ‘Opportunities and Challenges of Women-Owned Very Small Enterprises in India’, enabled by Intellecap, says that financial support will facilitate their growth and drive socio-economic inclusion by eliminating existing challenges.

“The pandemic exacerbated existing inequalities faced by India’s women entrepreneurs. This report explores how to unlock a $11.4 billion financing gap for WVSEs and charts a roadmap for financial institutions to better serve this segment in a post-COVID world,” said Wendy Werner, India Country Head at IFC.  
 
WVSEs face many challenges such as inadequate access to capital, technology and information, and infrastructure gaps. There are around 15 million women-owned micro, small and medium enterprises (MSMEs) in India, and contrary to popular perception, over 70% of them are manufacturing enterprises, many of which are home-based.

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Highlighting that the financial institutions have traditionally catered to men-owned enterprises, the segment of women entrepreneurs who often overcome biases from within the family and the business community, witness fractional treatment when it comes to lending.

The approach then limits the understanding of the operating contexts of women-owned businesses and their socio-cultural constraints. Given that most women entrepreneurs are self-financed, the lockdowns imposed during the COVID-19 pandemic have impacted their business and reduced their income, the report pointed out.

US-headquartered IFC is a global development finance institution focused on the private sector in emerging markets. In 2021, the impact investor had committed $31.5 billion to private companies and financial institutions in developing countries.

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The report suggests ways for financial institutions to design new products and new processes to address the needs of WVSEs.

“The underlying objective of this report, especially on International Women’s Day, is to showcase that this segment of WVSEs can be not just a potential business opportunity for FIs, but that serving it can also create a positive impact on the social and economic status of women entrepreneurs," said Amar Gokhale, Associate Vice President, Livelihoods & Gender at Intellecap, part of the Aavishkaar Group, which has engagements across 40+ countries and syndicated investments of over $500 million in capital.

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