Traditionally, women are hailed as adept homemakers who are judicious with money and savings. It’s interesting to note that this trend has also crossed over to the entrepreneurial landscape. A recently released report has found that Indian women entrepreneurs prominently use their personal savings as a primary source of funding, owing to a scarcity of access to formal funding for women-led startups.
Indian women entrepreneurs have proven their skill and adeptness at building leading ventures. Indian women founders are known to be dedicated leaders and possess determined skill sets but there still exists a large gap in VC funding for women-led startups.
Deeksha Ahuja and Avneet Kohli, co-founders of Encubay, a startup and angel platform, believe that lack of funding is one of the major reasons behind the low representation of women founders in the Indian startup ecosystem. They say, “Over the past 11 years, as the startup ecosystem has thrived in India, the number of female entrepreneurs has remained comparatively low. This disparity is primarily due to three key issues: knowledge gaps, networking limitations, and capital constraints.”
Factors such as gender biases, lack of collateral, and unfamiliarity with the financial systems often limit their access to formal loans and venture capital. Despite these barriers, the Indian entrepreneurial landscape is witnessing a surge in women-led startups.
In the majority, women establish small businesses that are funded with their personal savings or sustained through informal borrowing from their family and friends. This reliance on personal savings to nurture a business is not a choice but a reality of facing discrimination and restricted opportunities.
Analysis of Indian Women's Funding through Personal Savings
A survey by DBS Bank India and CRISIL released, a report titled 'Women and Finance' that mentions 39 per cent of self-employed women in Indian metros rely on personal savings to fund their enterprises, with 65 per cent not taking a business loan.
The reliance on personal funds increases with age, with 52 per cent of women over 45 using their own savings compared to 36 per cent aged 25-35. Bank loans were the primary choice for 21 per cent of women who obtained loans, while 7 per cent opted for funding from venture capitalists, angel investors, private equity, or fintechs. The data underscores the financial challenges faced by accessible and affordable financing options.
The report mentions that 53 per cent of women entrepreneurs in India use personal assets as collateral, with 28 per cent leveraging personal property and 25 per cent turning to gold. 64 per cent invest in safer options like savings accounts and gold, 39 per cent use cash credit, and overdraft facilities, 25 per cent with corporate credit cards, 11 per cent prefer property-backed term loans, 8 per cent for credit/bank guarantees, 8 per cent for the cash management system, and 8 per cent in supply chain finance.
Influence of UPI & Digitization
Competitive interest rates and flexible repayment terms influence loan choices. UPI has digitized India's financial transactions, with 73 per cent preferring digital payments and 87 per cent using digital methods for business expenses where 35 per cent stand for receiving and 26 per cent prefer paying. Additionally, for 36 per cent of women, cash remains essential for payroll and operational expenses. RBI states the hike of UPI preference among women in metro cities, including 97 per cent in Delhi, 93 per cent in Hyderabad, 90 per cent in Mumbai, 79 per cent in Bengaluru, and 64 per cent in Kolkata.
The survey was conducted on 400 self-employed urban women in 10 Indian cities that found a significant awareness gap about government schemes, with 24 per cent unaware of available options. However, 52 per cent have implemented sustainability policies, and 76 per cent have adopted sustainable practices. Women are also more committed to gender diversity, with 26 per cent having women on their boards and 37 per cent employing teams with over 40 per cent women. The report also highlighted that 29 per cent of women play leadership roles in business, whereas 7 per cent work in HR management. Retirement is a top priority, with 66 per cent saving for retirement and 38 per cent offering benefits.
Self-employed women face Bias in Networking
The all-India average for self-employed women facing biased conditions dealing with vendors is 16 per cent. These conditions occur while interacting or networking with businesses and vendors to raise funds for their ventures. The report notes that Southern India shows 33 per cent of gender bias, the highest among all Indian states, followed by Pune with 28 per cent, and Delhi with 11 per cent. Surprisingly, Kolkata stands with 0 per cent gender bias conditions for self-employed women.
