India’s next growth story needs more credit for women-led businesses

Let me say something that the data has been quietly screaming for years - the most disciplined, capital-efficient segment of India's emerging business class is being neglected. Not because of poor fundamentals. Not because of weak repayment records. But because the financial system was never designed with them in mind.

I am talking about women-led mid-market businesses. And it's time we stopped framing this as a charity case.

Over 55% of Jan Dhan accounts belong to women, according to the Ministry of Finance, and they own more than 20% of India's MSMEs as per a report by Niti Aayog. Moreover, women borrowers constituted 99% of the total clientele of MFIs, according to The Bharat Microfinance Report 2024.

We have built an entire grassroots financial ecosystem on the creditworthiness of women. And yet, the system hasn't kept pace with their growth.

The International Finance Corporation puts the credit gap for women-owned MSMEs in India at over $150 billion. That is not a rounding error. That is a structural opportunity waiting to be addressed.

What deserves closer examination is what happens precisely at the stage where businesses have proven themselves. We are not talking about unproven ideas or early-stage bets. We are talking about enterprises in the Rs 5-50 crore range, businesses with GST records, established cash flows, and real operating histories. These founders have navigated the hardest years and have thrived. But when they are trying to scaleup the business, the credit  system has not yet evolved and still works on the traditional business model.

Collateral in whose name? A credit history built on what? The frameworks we use were designed for a different era and a different default borrower.

What makes this particularly compelling case is that the risk argument works in their favour. Women-led businesses, by virtually every measure available, globally and in India, demonstrate stronger repayment discipline, more conservative capital deployment, and more sustainable growth patterns. These are not soft, feel-good metrics. In a credit portfolio, these traits translate directly to lower default rates and better long-term returns. We are not being asked to take more risk for the sake of inclusion. We are looking at an opportunity to deploy lower-risk capital more effectively.

So, what needs to change?

First, we need to move beyond collateral as the primary lens of creditworthiness. An asset-light business run by a woman who has grown revenues consistently for five years is not a riskier bet than a collateral-heavy business with volatile cash flows. Cash flow analysis, GST data, supply chain linkages, these tell a more accurate story than property titles. We have the data infrastructure to do this. The question is whether we have the willingness.

Second, product design needs to follow business reality. A seasonal business cannot be force-fitted into equal monthly instalments built for a manufacturer. Working capital cycles differ by sector. Repayment structures should reflect that, not override it. This is not special treatment; it is basic product design.

Third, and perhaps most importantly, financial institutions have an opportunity to proactively interact with the entrepreneurs as they are already embedded in ecosystems, industry networks, platforms, trade bodies. Engaging with them at such platform is not a concession. It is just smarter distribution.

Institutions that figure this out first will build portfolios that are more resilient, better diversified, and positioned for the next decade of India's growth story. The mid-market is where the country's next phase of economic expansion is unfolding. Women-led enterprises will be a significant part of it, whether or not formal finance shows up.

The choice, then, is simply whether to be part of that story or to help shape it.

We have been designing financial systems for an imagined average borrower for too long. When we design for the edges, for the realities that don't fit the standard model, we tend to end up with better systems overall. More flexible. More accurate. More resilient.

Inclusion, in that sense, is not the goal. It is the proof that the design actually works.

(Prema Jaiswal is a Senior Vice President – Risk Management & Operations at BlackSoil, an alternative credit platform)