MFIs Champion An Ecosystem Of Grassroot Women Entrepreneurs For Sustainable Progress

Demographic dividend is a buzz word while referring to the near-term fortunes of India. This is based on the premise that in the coming decade, India will have the largest working-age population in the world with over 1 billion people, which could translate into accelerated economic and social development of the country.

The glaring assumption here, however, is that the people that comprise this large powerhouse are productively employed. Clearly, since the private sector and government organisations may not be able to scale up sufficiently within this approaching time-horizon, to generate jobs for these millions, entrepreneurship is the solution.

There are various segments of enterprise within the country and the largest, in terms of numbers, though smallest in terms of per-unit value is women entrepreneurs in the rural and semi-urban geographies. According to a Google and Bain & Company report on women entrepreneurship in India, today, there are 13.5–15.7 million women-owned enterprises in India. These represent only 20% of all enterprises and a bulk of these comprise a single person and provide direct employment to an estimated 22 to 27 million people.

Unfortunately, the participation of women in India’s microenterprises is loaded with social and market factors that impact their productivity. While women run 20% of all microenterprises, a study by Azim Premji University’s Centre for Sustainable Employment and the Global Alliance for Mass Entrepreneurship reveals that they comprised 16% of this workforce and contributed only 9% of the aggregate value-added in the sector in 2015. Almost six years later, their share in the ownership of micro units and value add has not increased.

Promoting entrepreneurship among women is a vital component of the overall progress that India could achieve. This route to development does more than merely boosting jobs in the economy; it initiates social and personal transformations for women, which have beneficial effects for their families and larger communities.

However, unlocking entrepreneurship amongst women in India is a complex effort. Women enterprises tend to be smaller and more often than not, home-based, as women usually have to toggle between their work and domestic responsibilities. This, coupled with the fact that the category of grassroot-level women entrepreneurs usually do not own assets (such as titles to land or home or other assets that can be collateralized), makes it difficult for them to scale up.

Further, there is a high tendency for women to work with other women; studies have also shown that more than three-quarters of employees of women-owned establishments were female and, in some states, like Manipur and Kerala, this proportion was even higher at 91% and 90% respectively. Grassroot women enterprises also often face discrimination in the market, in the form of lower prices than male entrepreneurs for the same product.

Recognising these unique constraints faced by women entrepreneurs at the grass root level, Micro Finance Institutions in India adopted the Self-Help Group (SHG) model as far back as 1991. This model entailed offering low-cost financial services to self-management groups of women based on the aggregate savings of the group. As time went by, this model evolved into Joint Liability Group funding which was based on loan to small groups, without any collateral. These multi-pronged tools have been effective in reducing poverty, empowering women and creating awareness, which finally results in sustainable development.

Microfinance, in general, has played a large role in empowering women through provision of financial services to those in low-income groups, including consumers and the self-employed, who would traditionally have no access to banking and related services. It involves bringing credit, savings and other essential financial services within the reach of millions of people who cannot turn to the formal financial sector due to insufficient collateral or lack of knowledge about the products and services available.

It provides women with the financial backing they need to start business ventures and actively participate in the economy. But more than finance, it gives them confidence, improves their status and makes them more active in decision making in the home and community. According to CGAP, long-standing MFIs even report a decline in violence towards women since the inception of microfinance.

Beyond encouraging gender equality, access to finance through MFIs promotes progress in the homes and communities of the women it supports. It ensures the active participation of women in enterprise and consumption and could go a long way towards materialising the demographic dividend for India in the decade ahead.