Micro, Small, and Medium Enterprises (MSMEs) are businesses that manufacture, preserve, process, and produce goods or provide services. MSMEs have and continue to make significant contributions to India's socioeconomic growth. They are a major source of employment and aid in the development of the nation's rural and backward areas. In recent years women led SMEs have made a significant contribution to the global economy. Women-led SMEs, in particular, not only create jobs for themselves, but also employ others. In 2019, women-owned businesses accounted for less than 20% of all businesses in India. These 13.5 to 15.7 million women-led enterprises were mostly one-person operations that directly employed between 22 and 27 million people.
The number of women running small businesses in India has increased dramatically in recent years. According to government data, the number of women-led micro, small, and medium enterprises in India increased by more than 75% in FY22, to 8.59 lakh units, up from 4.9 lakh in the previous fiscal.
"While 4.9 lakh women-led MSMEs registered on the portal during the year 2020-21, about 8.59 lakh women-led MSMEs registered during the year 2021-22 (up to 28.03.2022)," Minister of State for Micro Small and Medium Enterprises Bhanu Pratap Singh Verma said in a written reply to the Lok Sabha.
In July 2020, the government replaced the previous process of filing an Udyog Adhaar Memorandum for registration of Micro, Small, and Medium Enterprises (MSMEs) with Udyam Registration.
"The number of women-led MSMEs registered on Udyam Registration Portal has witnessed a substantial increase," Verma said. Furthermore, according to data available with the Reserve Bank of India, as of March 31, 2021, 70.64 crore accounts in scheduled commercial banks belong to female account holders, according to the minister's response.
More women are launching their own businesses
The number of women starting their own businesses in India has steadily increased.
According to a 2019 report, 'Powering The Economy With Her: Women Entrepreneurship In India,' published jointly by Google and Boston-based consulting firm Bain & Company, women business owners have the potential to create 150-170 million jobs in India by 2030.
Female entrepreneurship is especially important for India because it catalyses women's labor-force participation at a time when women's labor-force participation remains low.
According to a recent report in The Economist, only 7% of working-age women in India currently have paid jobs.
In India, there are approximately 63 million micro, small, and medium-sized enterprises (MSMEs), with approximately 8 million run by women.
According to the National Statistical Office's periodic labour force survey, the unemployment rate for people aged 15 and up in urban areas fell to 12.6% in April-June 2021, down from 20.8% in the same month the previous year (NSO).
Joblessness was high in April-June 2020, owing primarily to the impact of the country's lockdown restrictions imposed to combat the spread of the deadly coronavirus.
Challenges
Despite an increase in the number of women-led MSMEs in India, they still face a USD 158 billion financing gap and rely primarily on informal sources. The most difficult challenge they face in running a business is obtaining capital, followed by managing business operations and obtaining a credit period from vendors/suppliers. Expanding on these roadblocks, respondents believe that starting and scaling a business is difficult for women SMEs, with raising the necessary capital being the common denominator in each stage. Lack of business and finance experience, according to 61% of women, is also a factor. To address some of the issues, most entrepreneurs still rely on banks for financing; however, years of business operation, insufficient credit history, and lack of property ownership are major roadblocks to getting their loans approved.
Here are global best practises in serving women-led SMEs that have been researched in order to provide specific recommendations for banks to develop successful strategies for reaching this segment.
So, what did we discover? To serve the women-led SME market, make sure to:
1. Understand Your Market and Customers: Market research and segmentation are essential for successfully serving this market.
2. View Women-Led SMEs as a Separate Group: The women's market should be viewed as a separate segment within a bank, with its own value proposition. According to research, women do not necessarily want differentiated financial products, but they do want to be treated differently and with respect.
3. Increase Internal Capacity: To increase internal capacity to serve the women's market, buy-in from the Board and Executive Management is required.
4. Modify Your Credit Processes, Lending Methodologies, and Delivery Models: Integration of standardised measures such as credit scoring, as well as analysis of formal and informal data sources such as the SMEs track record and future outlook, can help assess and mitigate risk.
5. Provide a Comprehensive Mix of Financial and Non-Financial Products and Services to Women: Women place a high value on both personal and business products and services, and they are often willing to consider multiple or bundled products from a bank.
6. Invest in Disaggregated Data to Prove the Business Case: Banks must collect and analyse data by gender to track the performance of their women's investments.
