Date: 16/03/2023

Relevance: GS-1: Role of women and women’s organizations.

Key Phrases: Cibil, Reserve Bank of India, CAGR, SEWA, Lijjat Papad, prospective entrepreneurs, Business Loans, rural women, women entrepreneurs.

Context:

• On 8th March, the world celebrated International Women’s Day.
• One of the ways to empower women is to ensure better access to credit.

Key Highlights:

• The share of individuals - men and women - in total credit reached a high of 44.4% in September 2022 from 44.1% in June.
• Credit growth for women outpaced that for men and accounted for 22.6% of borrowings by individuals, according to the Reserve Bank of India.
• As per TransUnion (Cibil), loan penetration among women rose to 14% in 2022 from 7% in 2017.
• The report showed that despite the pandemic, the number of women borrowers grew strong.
• Data shows that women borrowers increased at a compound annual growth rate (CAGR) of 15% over the last five years as against 11% for men.

How are Indian States Performing?

• The share of women borrowers in semi-urban and rural areas grew 18% CAGR between 2017 and 2022 as against 14% in metro and urban areas.
• Even Rajasthan and Bihar showed commendable growth in credit disbursal to women, based on total credit active borrowers.
• While West Bengal saw a growth of 22%, both Rajasthan and Bihar grew at 21%.

Top Women’s Loan Priorities:

• Business Loans: While the share of consumer loans—meant for personal and consumer durables—taken by women is on the rise, a substantial part of the credit facility availed by women is business loans.
• This reflects a growing number of women entrepreneurs—a big help for a country that’s moving ahead as an economic power.
• Between 2017 and 2022, women seeking business loans have more than tripled.
• Housing loans are seeing a rise in women borrowers.
• This is in line with the government’s inclusion plan.

Importance of empowering women through better access to credit

• Economic Growth:
  • Women-owned businesses can contribute significantly to the economic growth of a country.
  • When women have access to credit, they can start and grow businesses, which can create jobs and generate income for themselves and their families.
• Poverty reduction:
  • Women are often disproportionately affected by poverty, and lack of access to credit can exacerbate this problem.
  • When women have access to credit, they can invest in their businesses and generate income, which can help lift them and their families out of poverty.
• Gender equality:
  • Empowering women through better access to credit can help to reduce gender inequality.
  • When women have access to credit, they can participate more fully in economic activities, which can help to challenge traditional gender roles and stereotypes.
• Health:
  • When women have access to credit, they can invest in healthcare and improve their overall health outcomes.
  • This, in turn, can help to improve the health outcomes of their families and communities.
• Social development:
  • Empowering women through better access to credit can contribute to social development.
  • When women are financially empowered, they can participate more fully in decision-making processes, which can help to create more inclusive and equitable societies.
  • According to a report by the International Labour Organization (ILO), increasing women's participation in the workforce could boost India's GDP by 27%.

What are the various barriers women face while accessing credits?

• Societal and cultural barriers:
  • In many societies, women are expected to take care of the household and children, which often restricts their ability to engage in economic activities.
  • This perception leads to a lack of trust in women's financial abilities and contributes to their limited access to credit.
• Lack of collateral:
  • In most cases, women are unable to provide collateral for loans, such as property or other valuable assets.
  • This often results in their inability to access credit, as collateral is a significant requirement for most financial institutions.
• Limited financial literacy:
  • Many women have limited knowledge about financial products and services, which can make it challenging for them to navigate the complex financial landscape.
  • This can result in their inability to understand the terms and conditions of credit products, making it difficult for them to access credit.
• Discriminatory practices:
  • Women are often subjected to discriminatory practices by financial institutions, such as higher interest rates or stricter eligibility criteria.
  • This can limit their access to credit, making it challenging for them to start or grow their businesses.
• Lack of access to networks:
  • Women often lack access to networks that can provide them with information and support for accessing credit.
  • This can be due to factors such as gender segregation or lack of access to formal financial institutions in their communities.
• Limited mobility:
  • In many cultures, women have limited mobility and are unable to travel to financial institutions to access credit.
  • This can make it challenging for them to access credit, especially in rural areas where financial institutions are not readily available.

Way Forward:

• Women’s business clinics could be set up on the lines of agri-clinics to identify potential entrepreneurs, especially in villages and tier 3 cities.
• These may be mobilized on the lines of SEWA and Lijjat Papad, as women cooperatives and self-help groups.
• Banks for women should reach out to prospective entrepreneurs.
• Niti Aayog has started a women entrepreneurship platform, to connect them with sponsors.
• B-schools could start training more rural women.

Conclusion:

• India has made considerable progress in ensuring better access to credit for women.
• However, there is still a long way to go, and concerted efforts must be made to enable more women entrepreneurs to come up in India’s villages and tier 3 cities.
• Women’s empowerment through credit is not only essential for achieving gender parity but also for realizing India’s potential as an economic powerhouse.

Source: Live-Mint

Mains Question:

Q. Discuss the importance of empowering women through better access to credit, and analyze the recent trends in credit growth for women borrowers in India. (250 words).