Irem Sayeed, bringing over two decades of expertise in risk management and underwriting for various loan products. She oversees a large, diversified loan portfolio across the country, ensuring the development of a healthy, sustainable portfolio that meets both environmental and social compliance standards. She also leads a team of underwriters, driving best practices in risk assessment and portfolio management.
In a recent conversation with Women Entrepreneurs Review Magazine, Irem shares her insight on the evolution of lending practices towards women entrepreneurs, highlighting emerging trends reshaping access to finance for women-led businesses. She also addresses the unique challenges women borrowers face, industry adaptations, and key metrics for evaluating the effectiveness of credit programs for women entrepreneurs.
Given the current economic landscape, how do you assess the evolution of lending practices towards women entrepreneurs? What specific trends are emerging that are reshaping the availability of finance for women-led businesses?
In India 14% of entrepreneurs are women. In MSME segment 20% of MSMEs are owned by women. Women-led businesses face acredit gap of more than $11.4 billion and female entrepreneurs received only 5.2% of the outstanding credit granted to enterprises by Indian public sector banks, according to the International Finance Corporation (IFC). Having said that, things are changing. In last 1.5 decade with micro finance companies gaining popularity and foothold the situation is improving. Many of these MFIs are now providing much needed finance to women entrepreneurs. However the gap is too large and a lot of work needs to be done to fill that.
In the context of the BFSI sector, what unique challenges do women borrowers face compared to their male counterparts? How is the industry adapting its risk assessment and lending criteria to address these challenges?
There are many challenges, to list a few lets start with lack of financial literacy amongst women, then lack of collateral, inability to find co borrowers and co applicants etc. Most lending institutions find comfort in some security in form of property or cash collateral, or some guarantor or co borrower to back the loan. However all of this is not easily available specially with female entrepreneurs. The low penetration of credit amongst women borrowers perhaps is the result of lack of confidence, that financial institutions have, in their ability to pay, though without any substantial reason. Financial institutions end up asking for either a male co applicant/ guarantor or a collateral to back up the loan repayment.
If we go by only the statistics and get some inspiration from the micro finance model, that involves largely female borrowers only, we should be able to draw enough comfort on female borrowers and increase lending in this group of applicants.
It has been proven time and again that loan portfolios having larger women participants have performed better compared to books that have comparatively lesser women borrowers. It is about time we as lending community acknowledge this and show more confidence on this set of borrowers. New age lenders have recognized this and have adopted various ways to overcome these challenges. Some of these are unsecured loans, short tenure smaller bridge loans that female entrepreneurs can avail without and collateral . Lenders have recognized that women borrowers area a safe bet. Loans to women borrowers have lesser default and better repayments. Some lenders have started loan schemes offering concessional ROIs and no co borrower requirement for loans to women. Very easy example is Home loan to women. All banks and Housing finance companies are offering lower rates to women borrowers.
Can you discuss any observed shifts in investor sentiment or lending preferences that either support or detract from funding women-led ventures? How do these trends reflect broader societal attitudes towards gender and finance?
Now this is a really positive shift in attitude. Almost all impact lenders are looking to support lenders that have a dedicated portfolio allocation for women borrowers. Foreign Investors having lucrative low cost funds can really change the game for many lenders. Broadly I think the recognition of problem that there is a huge gap in funding and negative bias for women borrowers plus realization that women borrows have traditionally displayed better repayment tracks , is now changing the approach of investors and investee lenders alike. Investors realise both aspects, one that women are risk averse by nature. Psychologists believe that each gender manages risk in different ways, with research finding that females tend to consider the bigger picture and wider effects. When it comes to managing risk, it is vital that every potential impact is considered, meaning women's ways of thinking could be of greater value to businesses and less risky.Second , despite women being better borrowers and less risky , gap in funding persists in all markets.
What are some exemplary practices or initiatives within the BFSI sector that have successfully improved financial inclusion for women entrepreneurs? How can these practices be scaled or adapted across different markets?
Exemplary practices in the BFSI sector that have enhanced financial inclusion for women entrepreneurs include offering lower interest rates to women borrowers, which demonstrates lenders' confidence in their repayment capabilities. Additionally, eliminating the requirement for male co-applicants, providing loans to female-led startups, and employing female loan officers can significantly support women entrepreneurs. In the case of Non-Banking Financial Companies (NBFCs), accessing cheaper funding specifically targeted at female borrowers can facilitate the scaling of these initiatives. Ultimately, the ability to secure low-cost funding is essential for enabling competitive lending practices that benefit women entrepreneurs.
In what ways do cultural and societal attitudes towards women in business impact their access to finance? How can the BFSI sector effectively counteract these biases to foster a more inclusive financial environment?
As I said earlier biggest barrier is lack of financial literacy. Women don’t know what are the avenues available to them. Or the impression that as a women , though an entrepreneur, may not know much about business and hence a male member of family must be roped in to the loan . As responsible lenders we will have to train our people better. Treating female borrowers as equal is another step. Despite statistics showing better repayment tracks from female borrowers , many lenders are still skeptical of lending to women without male co applicants. I think by designing specific loan products and programs that address all these biases financiers can really breakthrough these barriers.
What metrics or indicators do you believe are most important for assessing the effectiveness of credit programs aimed at women entrepreneurs? How can organizations measure and track their success in improving financial inclusion for women borrowers?
Plain number tracking, setting targets and then tracking them. If we can allocate a part of funds towards disbursal to women entrepreneurs and then just rigorously track that, just like any other business target , it isn’t difficult to achieve the desired results. A TransUnion Cibil report on participation of women in India's retail credit market finds that “the credit quality of women borrowers is higher than that of men–53 per cent of the women borrowers were in the prime score range while only 47 per cent men were in this high range (prime score range: 731-790+). Most women borrowers repay loans on time. The consumer level 90 days-plus delinquency level is 5.2 per cent for women borrowers while it is 6.9 per cent for men borrowers “Same report states the number of women borrowers is increasing but they are still only 29 per cent of all borrowers.
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