'Improved Access To Finance, Timely Funding For Women-Led MSMEs Can Transform India¡¯s Start-up Ecosystem'

India is, well and truly, one of the world¡¯s start-up hubs. The country¡¯s Micro, Small and Medium Enterprises (MSMEs) contribute a healthy chunk to its gross domestic product. MSMEs contribute half of all product and service exports from India. The Union government¡¯s budgetary allocation for MSMEs in 2021-22 more than doubled to INR 15,700 crore from that in 2020-21. Despite this phenomenal increase in outlay, gender diverse MSMEs continue to face hurdles to accessing finance.

Women-led MSMEs face a different set of challenges in securing funding. In an interview with Indiatimes, Lavanya Jayaram, Executive Director, South Asia, Asian Venture Philanthropy Network (AVPN) talks about the need for pursuing gender-inclusive policies and facilitating access to financial schemes for women.

Q.1 What is the current level of representation of women in the Indian MSME ecosystem?

India¡¯s MSME sector contributes up to 30% of the total GDP of the country. As per a recent statement of the joint secretary of the Ministry of Medium-Small and Micro Enterprises of India women-owned entrepreneurs form 'only 20%' of MSME businesses. These numbers point to an evident gender divide in entrepreneurship in the MSME sector.

While India has been focusing on gender-inclusive policies and facilitating various financial schemes for women, there is a gap that needs immediate redressal. For India to become a $5 trillion economy, it needs to catalyse women entrepreneurship. I believe that one of the many ways to achieve this is to provide aspiring women entrepreneurs with timely access to finance and help them gain awareness about existing solutions available to them. This is where other players of the ecosystem can step in and aid these provisions being implemented by India.

Q.2 What special challenges do women led MSMEs face in attracting funds? How can these be overcome?

Most women entrepreneurs rely on self-funding to run their businesses and usually, this is because of a lack of access to formal finance and a limited access to technology. We know that as per estimates of the International Finance Corporation, almost 60 percent of the credit demand from micro-enterprises and 70 percent of credit demand from small enterprises is currently unmet by formal financial institutions in India. The pandemic has been specifically challenging for women entrepreneurs as most businesses exhausted their finances due to a lack of opportunities. They have had to fight social biases and conditioning, inability to access suitable credit options, limited access to non-financial services, and also limited exposure to accounting and compliance best practices.

AVPN has a dedicated Asia Gender Equality Fund that is committed to advancing women¡¯s economic empowerment in Asia through unrestricted funding. Through this fund, we¡¯re committed to raising and deploying US $25 million within the next five years to support initiatives and solutions by non-profit organisations focused on improving economic outcomes for women and girls in Asia.

We have also partnered with LEAD KREA University and published a report on ¡®Building Collaborative Philanthropy to Strengthen Women's Entrepreneurship in Urban and Peri-Urban Areas¡¯ that studied women entrepreneurs in India. In the report, it was observed that by recognizing the intersectional nature of the challenges faced by women entrepreneurs and developing a robust impact thesis that enables cross-sectoral collaboration, there is an opportunity to break silos. A collaborative philanthropy model can pool in expertise from funders that have experiences in different geographies and sectors and deploy blended financing models including a combination of grants, debt, and equity, and restricted versus unrestricted funding.

Q.3 What is the role that India, holding the current G20 Presidency, can play in empowering gender diverse MSMEs?

The G20 Presidency comes at an opportune time for India where we are recovering from the after-effects of the pandemic and an ongoing war. This presidency is significant because it will give a platform to leaders from governments, private companies, civil societies, and philanthropies to align and consensually arrive at a way forward. Promoting women¡¯s entrepreneurship is among India¡¯s most important growth and equality priorities. It has been identified as one of the most significant factors that will help raise household incomes, alleviate poverty, and help us achieve the 2030 United Nations Sustainable Development Goals (SDGs), especially SDG-5 on gender equality.

We at AVPN are equally motivated to support these priorities of India. In furtherance of the same, AVPN in partnership with Visa Foundation has launched a High-Level Task Force on Gender Diverse MSMEs. This Task Force brings together 40 diverse leaders from policy, corporates, and the social investment community to make key policy recommendations on the expansion and strengthening of gender diverse MSMEs in the Asia Pacific region to promote sustainable and equitable economic growth and job creation in the region.

Members of the MSME Taskforce and I participated in the recently concluded CII-IWN National Conference on Women Empowerment: Engendering B20. At the panel discussion, we discussed bridging the financing gap for gender-diverse MSMEs, addressing gender barriers in the MSME ecosystem, and providing capacity-building support for gender-diverse MSMEs. During the discussion, we deliberated upon actionable steps for both governments and private sector players that can further support women entrepreneurship in India.

Q.4 How would you rate the efforts of women led MSMEs towards digitization and integration in global value chains?

Women¡¯s entrepreneurship has the potential to contribute significantly to advancing women¡¯s rights and increasing their influence. While there are various solutions available in the ecosystem to address credit gaps, skilling requirements, and other challenges, there is a lack of scalable models that can be adapted to cater to different entrepreneur archetypes. An uneven access to digital tools and skill gaps poses a disadvantage for women entrepreneurs, particularly from low-income and socially vulnerable segments. According to a recent study by the International Trade Centre (ITC), women-led businesses in developing countries are adopting digital technologies faster than their male-led counterparts. The study also found that women led MSMEs are more likely to leverage e-commerce platforms to access global markets.

Again, I would like to reiterate that, at AVPN we believe ¡®Collaborative Philanthropy¡¯ can be leveraged to catalyze investment in women¡¯s economic empowerment by creating an enabling local ecosystem for entrepreneurship development, in underserved urban and peri-urban regions. This can play an important role in helping India bridge the gender gap to accelerate towards sustainable development goals and integrate gender diverse MSMEs towards digitization and integration in global value chains.