What’s stopping women from scaling up their SME businesses?

Besides lack of technical know-how and access to capital, inadequate infrastructural facilities, high cost of production, social attitude, and socioeconomic constraints also hold women back from becoming entrepreneurs.

Ease of Doing Business for MSMEs: Women entrepreneurs have the potential to be the growth drivers for the overall economy of the country. While there are many entrepreneurs establishing businesses and becoming successful, the challenges women face have remained constant. Small business owners deal with various obstacles brought on by limited resources available to them but this doubles up when it comes to women entrepreneurs leading a SME.

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Let’s talk about facts. About 90 per cent of SMEs owned by women in the country still rely on informal ways of securing capital or loans and around 66 per cent of these SMEs do not even have bank accounts, as per the report by International Finance Corporation, World Bank’s private-sector investment arm. It further said that there is a finance gap for women-owned 0.3 crore businesses based in India.

Hema Rajesh Chinchewadi, Secretary of national association for micro and small scale industries, Laghu Udyog Bharat (Karnataka), told Financial Express Online, “Besides the most basic challenge of sharing the responsibilities at home, one of the most critical areas where women entrepreneurs face issues is trying to gain access to business loans. Thereafter, there are hurdles like lack of technological know-how, availability of raw materials, gaining access to a good vendor base, amongst others.”

Even as there has been a rise in the number of women entrepreneurs in the world today, gender norms are hindering their growth. Interestingly, according to the Annual MSME Report 2020-21, only 20 per cent of total MSMEs which amounts to approximately 1.2 crore are owned by women. Hardika Shah, Founder and CEO, Kinara Capital, a fintech company, said, “At the micro-level, women entrepreneurship is higher than the average at 20 per cent but that number drops to five per cent at the small-MSME level and less than three per cent at the medium-sized level.” 

Shah further stated that over 90 per cent of women entrepreneurs end up staying in the micro-category and have to rely on their family or informal lenders for financing. One of the reasons for that is organizations too openly discriminate against women entrepreneurs seeking a loan without a male relative as a co-signer. 

Another bottleneck is the requirement of a property collateral for loan but very few women in India own land further reducing their access to banks. For women entrepreneurs, the main issue that needs to be addressed is fixing the credit gap. “Even though women business owners are likely to have better repayment, and spend most of their income on the well-being of others thus improving their families and communities, the women MSME credit gap in India is estimated to be at US$158 billion, according to the IFC report,” said Shah.

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Besides capital access, women entrepreneurs go through challenges like social expectations which demand their attention towards their family rather than their business venture. Also, it is difficult for women to find mentors and advisors to help them scale and the lack of business networks further creates problems in finding customers, partners, suppliers or in building connections to gain that market access necessary for an enterprise to excel.

It gets tougher for women entrepreneurs in tier-II and beyond. Chayaa Nanjappa, a first generation rural woman entrepreneur, who is the founder of Nectar Fresh, a  honey producer and supplier, talked about harassment she had to face from various authorities such as the excise department, regulatory offices, government representatives at various levels like being asked to keep waiting for hours for getting documentation done, or not clearing her compliance documentation.

Nanjappa maintained that even as women entrepreneurs are standing tall against these problems, government intervention is a must, if the nation is aiming towards an Atmanirbhar Bharat. “I had even appealed to the Prime Minister’s Office (PMO) for intervention but received no support whatsoever. I am still facing harassment from the local authorities for document clearance, etc.” Besides, she feels women in rural India are not aware about government schemes and subsidies and marketing strategies that can help them in growing their business. Nanjappa is also the country president of Association of Businesswomen in Commerce & Industry (ABWCI), a global chamber of commerce for women. 

Also read: Women’s Entrepreneurship Day: Why only 20% of India’s over 6 crore MSMEs are led by women?

The Covid-induced pandemic has led to tremendous losses to a number of businesses and while the government announced relief measures for MSMEs in 2020, there were no specific measures to help women entrepreneurs even though 73 per cent of women-run businesses were hit badly, and nearly 20 per cent were on the brink of closure, as per the October 2020 Bain-Google-AWE Foundation report. 

For women entrepreneurs, many policy packages and schemes are available yet their impact on the ground remains to be seen. In 2018, Niti Aayog launched Women Entrepreneurship Platform (WEP), a portal to provide knowledge and support to women entrepreneurs.The Ministry of Micro, Small and Medium Enterprises too launched a network for women entrepreneurs, Udyam Sakhi which claims to have 2,859 registrations for support on their entrepreneurial journey in terms of knowledge about various schemes and compliances, etc. It is important now, more than ever, that the government agencies, Non-Government Organizations (NGOs), civil society engage to foster women’s education and encourage funding institutions to accept and grant loans to women entrepreneurs.