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Women Entrepreneurs In MSME Sector Ready To Shine But Are We Doing Enough For Them?

It is indeed encouraging to witness women-owned MSMEs increase in proportion in the overall MSME base — from 13.72 per cent to 20.37 per cent over the past ten years in India

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Once a male-dominated industry, the Indian micro, small and medium enterprise (MSME) sector has come a long way. In the last few years, it has slowly but steadily witnessed an exceptional change as after fighting all the odds, women entrepreneurs made their presence felt.

In India, the number of women-owned SMEs has significantly increased by over 75 per cent in the financial year (FY) 2022, from 4.9 lakh units in the previous financial year to 8.59 lakh units in FY22, as per the government data. 

Recently, the country has seen rapid progress in terms of providing incentives for women entrepreneurs to elevate their contribution to the nation's growth story. Also, as per the CIEL HR report, the sector has recorded a relatively higher rate of women participation in the workforce (24 per cent) compared to other industries. 

However, are these numbers enough for a country like India — which is one of the fastest-growing economies in the world? On this Women's Entrepreneurship Day, BW Businessworld spoke to female leaders to know what is the current status of women-led MSMEs in India and what are the challenges they still face.  

"The current scenario is much better than before and we have seen a rise only in women-led SMEs in India. However, I strongly feel that more participation is expected and should be there from women as they have the potential to drive India’s economic growth," said Prerna Kalra, Co-founder, Daalchini Technologies. 

Also Read: Let's Talk About Female Participation In India's Growth Story

In India, only 20 per cent of businesses are women-led and a majority of them fall in the nano business category — over 90 per cent of employing less than two workers. 

"While in general women undertake more traditional home-based businesses, there is huge potential for growth-oriented women entrepreneurs to leverage ecosystem level support to reach their aspirations," said Preethi Rao, Associate Director, LEAD at Krea University

Financial Issues

India's women-led businesses witness financing gaps because of social biases on the supply side. Females struggle to secure enough credit to start their own businesses as several financial institutions view them as non-productive sustenance level entities and thus grant lower values of loans (as much as 50 per cent below their male counterparts). 

Also, there is a lack of credit history as they remain informal, which perpetuates the credit gap. According to a study by the International Finance Corporation (IFC), women-owned enterprises in India face a financing gap of around 70 per cent. 

Also Read: In India, Women Struggle To Take Active Part In Nation's Growth Story

"Women-led MSMEs in India find it tough to secure funding. On the flip side, a lack of awareness of the digital lending space is the primary reason why women entrepreneurs find it a challenge to secure funding. We need to ensure there is financial literacy and that females are aware of not only their social rights but also their economical and entrepreneurial rights," said Kalra. 

If data is to be believed, around 8.59 lakh women-led MSMEs were registered in FY22 up till March 28, 2022, over 4.9 lakh registrations in FY21. Many feel that this is a testimony to the fact that women-led MSMEs are growing in our country. 

However, one of the major issues that restrict women entrepreneurs to start their ventures is the unavailability of loans. They either have to self-fund their startups or seek informal credit options such as banks or other financial institutions where the guarantee is unsure.

"To solve this funding dilemma, private and public organisations have to come together to recognize and support women's businesses. Initiatives and networks to provide assistance and mentorship to these women they face in acquiring funds is the way out of this issue," said Amazon India Spokesperson. 

Deepthi Ravula, Chief Executive Officer (CEO), WE-HUB — an initiative by Telangana government said that in terms of funding for MSME, it is a mixed bag. The challenges for MSMEs are numerous but for women-led MSMEs, the barriers are slightly higher. 

"The key thing we need is a platform connecting both the entrepreneur and the financial institutions. The way to fix this is by creating more platforms (both physical and virtual) to enable collaboration between both of them. Bridging the digital divide for digital lending is important to identify, support and scale more women-led and micro-SMEs in India," Ravula added. 

Statistically, women-led MSMEs face a financial gap of USD 158 million. Hence, experts also noted that to increase women’s access to formal credit which can result in higher female entrepreneurship and boost India’s economic output, India needs a collaborative and multi-pronged approach is required to enable better access to credit. 

"Increasing awareness of existing government schemes such as Mudra and building capacity of women business owners to understand requirements of accessing formal financial products is required. On the supply side, financial institutions should customise their offerings to women-led businesses through alternative credit scoring methods and innovative productisation," Rao noted. 

Amazon India's Spokesperson also said that digital literacy can be a path changer for them as this can give them access to systematic digital lending platforms. Lack of knowledge in financial planning could also be a reason for the difficulty in acquiring and managing funds, hence initiatives to educate them on finance management can help them plan and evaluate their business effectively.   

The Future

Post the Covid-19 pandemic, India is moving forward from a consumer to a manufacturing economy. Hence, experts believe that there is a major requirement for more MSMEs to grow and thrive. Also, there is a need to ensure that women MSME owners can go from nano enterprises to building valuable brands. 

"By utilising government schemes, upskilling themselves for the digital economy, and handholding women entrepreneurs to chase their business dreams, we have the potential to create a rock-solid business environment for SMBs and enterprises of all sizes," said Ravula. 

Interestingly, India has more than seven million MSMEs which create more than 120 million jobs, which further accounts for 33 per cent of India's gross domestic product (GDP). Through this sector, India is aiming to become a USD 5 trillion economy in the next five years.

"As we look at the next phase of growth for the MSME sector, technology adoption and digital transformation will play a huge role in making them future-ready and enable them to play an even more important role in growing India’s economy," added Amazon Spokesperson. 

Rao also said that post-Covid-19, women collective enterprises played a major role in resilience and recovery by producing essential equipment like masks, PPE and sanitisers. MSMEs have utilised their flexible structures to imbibe innovations and pivotal strategies and with increasing contributions to GDP and exports, much more than comparable countries in South Asia and they are poised to drive growth in coming years.

"I feel that combining entrepreneurship, innovation and agility, the MSME sector will not only play an integral role in making India a USD 5 trillion economy in the next few years but also drive the country’s economic growth by 2047," said Kalra. 

Meanwhile, for women entrepreneurs, the road ahead is long. However, by putting entrepreneurship, innovation, agility, and resilience at their core, they are poised to become a growth engine for making India a developed country by 2047.