Ease of Doing Business for MSMEs | Women’s Entrepreneurship Day: The number of micro, small and medium enterprises (MSMEs) led by women entrepreneurs in the country has jumped from a mere 2.15 lakh, as per the MSME Ministry’s FY11 annual report, to 1.23 crore in FY21. Women MSMEs have managed to enhance their share in the overall MSME base from 13.72 per cent to 20.37 per cent in the past 10 years. Now whether 7 per cent is a fair growth or not in 10 years is debatable, but experts believed women’s participation in the MSME sector needs to be enhanced on a war footing from 20 per cent for India to multiply its economic growth.
The prime reasons for the low share of women MSMEs in the overall MSME base in the country, according to experts, are arguably unconscious biases, challenges in accessing finance and building own network, lack of safety in public spaces, sometimes not getting enough support from family, lack of child-care options, often lack of confidence in their own skills in business, etc.
“Women put their substantial time looking after family and in the remaining time pursue their passion. To expand that idea into a proper business, they need more time and physical space to first test their model. They can’t invest heavily directly into setting up an office or buying land for a factory while managing the family. There is no gender parity here as men can dedicate more time to work or business and invest more. That’s an unsaid truth. There should be plug-and-play infrastructure for them to commercially test their models without much investment,” said Shashi Singh, Chairperson at women entrepreneurs’ network — Consortium of Women Entrepreneurs of India told Financial Express Online.
Lack of credit access or awareness around existing credit support available by the government is a common challenge among male and female entrepreneurs to start and grow their businesses. With respect to women MSMEs, the finance gap is worth $158 billion with 90 per cent of such women entrepreneurs relying on informal sources of financing, according to Qamar Saleem, Regional Manager for Asia & Pacific, Financial Institutions Group, International Finance Corporation (IFC). Saleem was speaking at the recent virtual Sankalp Global Summit 2021.
“They (women MSMEs) are actually a better risk profile. So, there is a clear business case for financial institutions to consider this as a market opportunity. They are concentrated in the informal space but we are also looking beyond informal — into micro enterprises,” Saleem added.
According to IFC, the financing gap is largest for the women-owned ‘very small enterprises’ (WVSE) segment in India, which banks and microfinance institutions have been unable to address. WVSEs in India have less than 20 employees while turnover ranges from Rs 10 lakh to 50 lakh. Further, over 70 per cent WVSEs are engaged in seven activities viz., textiles manufacturing and wearing apparel, handicrafts manufacturing, food and grocery retail, jewellery and accessories retail, beauty salons and personal services, and eateries.
However, lenders are said to be a bit more conservative in lending to women entrepreneurs. “Bankers are very conservative in their approach. Unless the government takes a strict approach to lend to women MSMEs in a stipulated time, banks won’t enhance their lending. People look at gold loans as they don’t want to get into the hassle of bank funding and uncertainty of getting the loan approved,” said Rajni Aggarwal, President at advocacy group for women entrepreneurs — Federation of Indian Women Entrepreneurs told Financial Express Online.
Raman Aggarwal who is currently the Area Chair — NBFCs at New Delhi-based think tank Council for International Economic Understanding (CIEU) believed it is a matter of perception among women borrowers that lenders’ approach to them is different. “While banks and NBFCs generally don’t have specific allocation or scheme for women entrepreneurs but there is no negative bias against women entrepreneurs. Focus shifts from market to market, not from one gender to another. For NBFCs, whatever money is borrowed from banks, financial institutions, and retail investors has to be rotated among customers, whether they are male or female. However, to enhance women MSMEs’ share, it has to be driven by the regulator or policymaker. If the govt comes up with a special lending scheme like ECLGS exclusively for women, NBFCs would be happy to participate,” Aggarwal told Financial Express Online.
Among major schemes for women MSMEs, Prime Minister Narendra Modi had launched the Stand-Up India programme on April 5, 2016, for lenders to lend to at least one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and one-woman borrower per bank branch for setting up a greenfield enterprise in manufacturing, services or trading sector. According to the latest data from the scheme’s portal, over 1.43 lakh applications involving Rs 34,076 crore have been received so far, of which 1.25 lakh applications worth Rs 28,212 crore were sanctioned via 367 lenders. The data on disbursement wasn’t available.
On the awareness part, while the government needs to organise micro-campaigns across cities and towns about schemes for MSMEs and women entrepreneurs, the latter also must make an effort in building their network of mentors and fellow entrepreneurs along with a digital presence to stay abreast of the government support available. According to Chennai-based social entrepreneur focusing on enabling women entrepreneurship Mahalakshmi Saravanan, efforts from both government and MSMEs need to go hand-in-hand. Saravanan runs Women Entrepreneurs India, a social network for women entrepreneurs to learn, network, and grow in business.
“When you want more women to turn entrepreneurs and succeed, they need to first forget that they are women entrepreneurs. The mindset has to be only of an entrepreneur without adding the gender to it in order to truly explore their potential. While the government has to come up with a lot of campaigns than what was done before on a consistent basis, entrepreneurs need to put in a lot of effort as well alongside. So business literacy, government schemes’ related literacy, financial literacy have to be there when they start. Having social media account for business is not enough. There has to be a digital presence through a website,” Saravanan told Financial Express Online.
Due to lack of awareness, often entrepreneurs end up paying money to middlemen for helping them through government processes. Saravanan said some entrepreneurs don’t even know that they can register on the government’s Udyam Registration portal for free and depend on middlemen. For instance, S. Vyjayanthi who alone runs a small bakery unit in Chennai had to pay Rs 1,000 to a middleman for registering her business on the Udyam portal. “This was my first venture and I had little idea about how to register on this new portal. I also had little time to do all this. So, I had to pay my friend’s CA for doing this,” Vyjayanthi told Financial Express Online.