How Useful Is Microfinancing for Women Entrepreneurs in India

Microfinancing for women
(Last Updated On: October 6, 2020)

Microfinancing for women entrepreneurs in India has proven to be one of the most effective ways to get businesses started. Women empowerment is not a term thrown loosely around, in a country like India it can lead to economic acceleration for many underprivileged societies.

India is home to millions of women entrepreneurs, a lot of them are owners of several MSMEs. Women in India own over 3 million small businesses across the country.  As per IFC reports, they also employ over 8 million people to help run their businesses successfully.

So, how does microfinancing help them?

What is microfinance?

In the ’70s, a professor in Bangladesh lent women in his village a small sum of money to help them sell bamboo stalks. In a few years, this became a means to provide several women entrepreneurs with the initial round of funding they need to run their businesses.

Microfinance is in literal terms, informal lending. It started as a financial measure to help those businesses that did not have access to banks or other lending institutions. Microfinance includes microcredit, a provision of providing small business loans to underprivileged entrepreneurs. It also includes providing savings, microinsurance and payment systems for these businesses.

How is Microfinance useful for women entrepreneurs in India?

Let’s take the story of Irawati, an entrepreneur from Varanasi. When she got tired of tying saris using bamboo poles for her business, she reached out to Utkarsh, a microfinance institution. Finally, over a series of small loans provided by Utkarsh, she was able to set up her business, using proper equipment. You can read the full, inspiring story here.

Women entrepreneurs in India require double the loans that they are actually provided by formal lenders. Only 27% of their money needs are met through formal lending institutions such as banks, cooperatives, microlenders and non-banking companies.

Almost  90% of India’s 90 million plus microfinance clients are women.

Similarly, there are several microfinance institutions and schemes by the Government that helps women from remote areas in India set up businesses.

Government microfinance schemes for women:

The Indian Government has made a few strides to help women entrepreneurs come out of their comfort zones and find solace in microfinance to set up and run their businesses.

Rashtriya Mahila Kosh (RMK):

An organisation set up in 1993 under the Ministry of Women and Child Development.

women need not provide collateral for amounts of less than 1 crore. Likewise, for amounts more than 1 crore, the borrower must provide 10% of the sanction amount in the form of fixed deposit as security. The maximum loan for an individual woman beneficiary (income generating) is Rs. 50,000.

 Stand Up India scheme

A popular Government scheme, Startup India targets women from the SC/ST communities who want to avail business loans. They market their business in order to promote entrepreneurship. With the help of this scheme, women can avail loans that can range from Rs. 10 lakhs to Rs. 1 crore.

Mudra Yojana Scheme for Women

A no collateral loan scheme provided for aspiring women entrepreneurs.  The borrower will be provided with a Mudra card. This works like a credit card and helps them buy supplies for their business.

Bharatiya Mahila Bank Business Loan

A loan scheme for women who want to start a business in the retail sector, primarily.

Women entrepreneurs with manufacturing industries can avail loans up to Rs. 20 crores. A concession is available to the extent of 0.25% on the interest rate and it can go up to 10.15% or higher.

Under this scheme, there is no requirement of collateral for a loan of up to Rs. 1 crore.

Dena Shakti Scheme

Started by the Dena bank, this scheme provides small business loans to women in agriculture, manufacturing, micro-credit, retail stores, or small enterprises. The interest rate is lowered by .25%. Likewise, the maximum loan that can be availed for retail, education and housing is Rs. 20 lakhs.

Cent Kalyani Scheme

A loan scheme by the Central Bank of India. This scheme targets self-employed women in agriculture and allied activities, retail trade, and government-sponsored programs.

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