Women-led development, by India’s women-led enterprises – a key piece of $5 trillion goal

Women-led development, by India’s women-led enterprises – a key piece of $5 trillion goal

By Mitali Nikore

Micro, small, and medium enterprises (MSMEs) are the beating heart of India. In 2021-22, a third of India’s GDP was generated by MSMEs, and MSME contribution to exports stood at 44%.

Central and State governments have consistently supported women’s entrepreneurship through various schemes over the years. Amongst these, three initiatives stand out as transformational for women entrepreneurship in India.

First, the self-help group (SHG) movement. Pioneered by the Self Employed Women’s Association (SEWA), the SHG movement in India dates back to the 1970s. The Government of India has supported SHGs through various schemes like the SHG-Bank linkage program (1992), the Swarnjayanti Gram Swarozgar Yojana (SGSY) (1999), and the Deendayal Antyodaya Yojana-National Rural Livelihoods Mission (DAY-NRLM) (2011).

Today, India has nearly 12 million SHGs, with 88% run entirely by women. SHGs have diversified from traditional sectors such as food processing, and textiles towards green industries. SHGs were even at the forefront during COVID-19, producing almost 170 million masks and personal protective equipment.

Second, the availability of MUDRA loans. The Micro Units Development & Refinance Agency Ltd (MUDRA) was established in 2015 to enable collateral-free credit to MSMEs.

Women entrepreneurs have been the biggest beneficiaries of MUDRA loans. Of the 422 million MUDRA loans given under the Pradhan Mantri Mudra Yojana since 2015, almost 70% have gone to women entrepreneurs. Women’s share in the total MUDRA loan value stands at 47%. As women are less likely to own land or other assets, the collateral free nature of MUDRA loans served to ease a major constraint in accessing finance for women.

Third, strong digital public infrastructure (DPI). Thanks to the JAM trinity of Jan Dhan-Aadhar-Mobile linkages, over 80% of adults have bank accounts in India. This is a remarkable achievement, which would have taken another five decades without the enabling DPI. Women form the majority of Jan Dhan account holders, with more than 260 million accounts (56%).

India’s DPI has fostered growth of private sector fin-tech firms that offer customized financial solutions for women entrepreneurs. Moreover, leveraging this DPI, India is developing mentorship and digital inclusion platforms to support women entrepreneurs across G20 countries.

Studies show that women-led MSMEs typically outperform their male counterparts, generating higher profit margins and lower non-performing assets. As India moves towards its goal of becoming a $5 trillion economy, formalising women-led MSMEs, and creating opportunities for women entrepreneurs to scale up are important growth drivers. And for this, we need more efforts to activate ecosystem enablers.

Financiers can contribute by developing investment appraisal frameworks that reward businesses promoting gender equality. In 2021-22, for every INR 100 of venture capital funding raised by start-ups, less then INR 1 went to all-women teams and INR 9 to mixed gender teams, with 90% going to all-male teams. Be it microfinance institutions, banks, or venture capitalists, gender lens investment frameworks can support an ecosystem where financiers set quantitative targets to direct investments towards women-owned, women-managed, or women-focussed businesses.

Investments in the care economy are also an essential ecosystem enabler. Indian women spend on average 5.6 hours on unpaid domestic and care work everyday, vis-à-vis 30 minutes for men. Women entrepreneurs (and men entrepreneurs) require access to safe, affordable, and reliable care infrastructure and services for childcare, elderly care, and long-term care. Investments in the care economy by governments at the central and state level, should also be complemented by the private sector, and by innovative public-private-partnership models.

And most importantly, women need to feel safe when using public transport and public spaces. Women entrepreneurs cannot compete with their male counterparts if they must return home in the evening hours due to lack of safety. Starting from safety audits, improving street lighting to bystander intervention campaigns, and introducing more women police – a series of long-term measures are required to enhance women’s safety.

Estimates suggest that policy action to accelerate women’s entrepreneurship could create more than 30 million women-owned enterprises, generating 150 – 170 million jobs in India by 2030. Women’s leadership in entrepreneurship is, thus, a key ingredient in the recipe for economic growth in India! And its time for women, and men, to start cooking!

(The writer is founder and Chief Economist, Nikore Associates.)

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