Women MSMEs still struggle for credit despite schemes, Pg7

Context

• Despite numerous government schemes to promote women-led Micro, Small and Medium Enterprises (MSMEs), access to formal credit remains severely restricted, leading to underperformance and financial exclusion.

Key Highlights:

• Women-owned MSMEs account for 20% of registered MSMEs but contribute only 10% of turnover.
• Women face a 35% credit gap, higher than the 20% gap for men, limiting business expansion.
• Under PM MUDRA Yojana, women hold 64% of accounts, but receive only 41% of sanctioned funds.
• Informal Micro Enterprises (IMEs) led by women constitute 70.5% of Udyam Assist Portal registrations.
• Financial illiteracy, lack of collateral, and institutional bias hinder access to credit.
• RBI has reduced repo rate to 5.50% aiming to improve liquidity for lending.
• Women entrepreneurs often require twice as many bank visits as men to secure a loan.

Detailed Insights:

• While MSMEs contribute nearly 30% of India’s GDP, women-led enterprises remain underfunded and underrepresented, despite numerous policy incentives.
• Discrimination in loan disbursal and the collateral-based lending structure particularly affects women, most of whom lack asset ownership.
• Women-led MSMEs, despite forming a large base under schemes like PMMY, receive disproportionately lower funding, leading to reliance on informal credit.
• The Udyam Assist Portal, meant to formalise IMEs for credit access, has had limited success due to lack of ground-level awareness and bank cooperation.
• Low financial literacy, especially among first-generation entrepreneurs in rural areas, weakens participation in formal finance systems.
• The persistent implementation gap in financial inclusion schemes has led to economic inefficiency and unmet SDG goals related to gender equality and financial empowerment.

Key Concepts Involved:

• Credit Gap: The difference between the credit sought by borrowers and the amount actually disbursed by financial institutions.
• Repo Rate: The rate at which the RBI lends money to commercial banks. Lower repo rates promote borrowing and liquidity in the economy.
• Informal Micro Enterprises (IMEs): Small businesses that are unregistered and operate outside the purview of formal economic systems.

Mains Mock Question:

Despite numerous government schemes, women-led MSMEs in India continue to face significant hurdles in accessing formal credit. Discuss the reasons and suggest policy-level interventions to ensure financial inclusion of women entrepreneurs.