It’s a challenging world for women, especially when it comes to securing formal loans. The bias that women entrepreneurs face when trying to access credit from banks, government institutions, and similar formal sources of finance can be massively delimiting for them to achieve self-reliance and growth.
A study undertaken by the Goa Institute of Management (GIM) underscored this fact when it investigated data on women-owned enterprises in the unorganised sector, and also delved into ways to overcome gender disparity when women access credit.
The study, which has been published in the prestigious journal, ‘Applied Economics’, sifted through statistics comprising 4 lakh unorganised sector firms chosen from the 2022-23 round of National Sample Survey Office’s (NSSO) Annual Survey of Unincorporated Sector Enterprises (ASUSE) and found clear evidence of a gender gap in access to credit.
The silver lining in this analysis is that when women-owned enterprises in the unorganised sector use digital technology such as internet banking and other financial services, it helps reduce the gender gap in access to credit.
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Ashay Kadam, Professor, Banking, Insurance and Financial Services, GIM, says this highlights the role played by financial institutions in boosting entrepreneurship for women.
“Financial institutions play a very important role in boosting entrepreneurship and job-creation in India’s informal sector. Any disparity along the lines of caste, gender etc. in the loans they grant is likely to severely limit the good they can achieve with the credit they grant,” he said.
Swarna Parameswaran, Assistant Professor, Economics, General Management and Public Policy, GIM, agrees with him, saying access to formal finance is essential to the growth and development of women business-owners.
"Access to formal finance is essential for the development and growth of women entrepreneurship in India. While, women firm owners face disadvantages in securing formal loans compared to men firm owners, the use of digital technology provides a ray of hope in bridging this gender gap," she said.
The need of the hour, opine the researchers, is spreading financial literacy, particularly knowledge about the use of digital banking and financial services.
“While digital financial technology-adoption is expected to improve financial inclusion of women, the pace of product innovation has recently been far higher than that of knowledge diffusion,” said Ashay, adding, “At the bottom of the pyramid, we need to invest just as much time, effort and money in driving financial literacy, as we do in creating new financial technology.”
While researchers recommend a re-examination of banking and supervision policies and practices to reduce gender disparity in accessing formal credit, they also say steps should be taken to promote greater use of these services.
"Particularly, the use of digital banking and financial services mechanisms enables higher formal finance access among women entrepreneurs by reducing information asymmetry and the need to visit financial institutions multiple times.
Steps towards increasing awareness about the benefits of digital financial technologies and promoting greater use of these services will mitigate the financial constraints faced by women entrepreneurs," Parameswaran adds.
There can also be special schemes designed and government funds allocated to promote the use of digital technology for women-owned enterprises in the unorganised sector, they opine.
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