Why raising capital remains one of the biggest challenges for women-led MSMEs

A recent survey by one of the ecosystem-lending platforms for MSMEs, Indifi Technologies, has revealed that the biggest challenge women entrepreneurs face is in securing capital to run a business, followed by managing business operations, and securing a credit period from vendors/suppliers. 

It found that starting and scaling up the business is difficult for women SMEs, with raising the requisite capital being the common challenge in each stage. Around 61 percent of respondents also believed lack of business and finance experience is a contributor to this. 

The survey received participation from 250 women-led MSMEs from across sectors including ecommerce, restaurants, travel etc, at different stages of their businesses. It aims to understand the needs and challenges of women entrepreneurs, and enable greater inclusivity in the lending space for them to flourish and scale. A majority of the respondents were between the ages of 31 and 50, and a large portion of respondents have been operating their businesses for the past two to four years. 

Speaking to SMBStory, Siddharth Mahanot, Co-founder and COO, Indifi Technologies said that out of the 40,000 loans they have disbursed to businesses to date, 20 percent were women-led MSMEs. Though Indifi has partnered with various companies, as well as Facebook, to help small businesses get funds easily, he believes that lack of awareness about the digital lending space is the major cause of concern for women entrepreneurs to not have access to credit.

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Further decoding the intersectional challenges through the gender lens, the survey states that 45 percent of the women entrepreneurs believe that having a male co-founder makes running the business easier. They also shared the top three attributes that a male co-founder brought to the table in a business — managing a team, interacting with vendors and clients, and securing capital/funds. 

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Sharing thoughts on the survey's findings, Stuti Gupta, Co-founder of Amrutam, a Gwalior-based Ayurvedic beauty and wellness brand, says other than digital lending space, when a woman founder of a small business approaches the venture capital (VC) ecosystem for fundraising, a critical factor would be networking.

“While several men can get together in a bar to discuss business - do women have the same liberty? Would women feel safe networking the same informal way men can? Even the fact that the getting-to-know-each-other calls are limited and time bound for women builds a huge gap. Say, if women were represented at least 50 percent in the VC firms and investment space, more women founders could have freely approached them, had more informal conversations just like men get to do,” Stuti says. 

The survey also reveals that insufficient credit history, years of business operation, and lack of property ownership are the eligibility criteria hurdles women entrepreneurs face while accessing credit/business loans from banks and NBFCs. Ludhiana-based ice cream manufacturer Simmi Bakhru says that another challenge raising business loans lies in the lack of information about government schemes. 

“We often read about various government schemes but at the official level we don’t get proper guidance. There is a lack of information. The central government has launched various schemes but that is not accessible to every woman entrepreneur,” she adds.

The survey states that the number of women-led MSMEs in India has jumped from 2.15 lakh to 1.23 crore in just a decade. However, they face a finance gap of $158 billion and largely rely on informal sources.

Siddharth says,

"A significant volume of our loan disbursements happen to women entrepreneurs, yet we are cognizant that the credit gap to be bridged still remains large."

If the gaps in the sector are addressed, the MSME ecosystem, which is considered the backbone of the economy, would emerge with the backing of women-led owners.