With the 2018 International Women’s Day motivating the world to Press for progress, gender parity still seems to be a challenge when it comes to obtaining startup capital in India. In a study conducted last November on the women entrepreneurs at the IITF-India International Trade Fair at New Delhi, only 18% of the sample reported having obtained external funds for the business, the rest relying on self-funding or borrowing from family members. Over 86% of the sample felt that women face serious issues in funding their startups.
The entrepreneurs, who hailed from different locations such as Delhi, Bengaluru, Patna, Dehradun, Manipur, Assam, and Jammu and Kashmir, manage a variety of business such as clothing, jewelry, crockery, food processing, grocery, and home electronics. Around 77% of the women were graduates, with experience ranging from 2 years to over 10 years in their respective trades.
On being asked what discouraged them from obtaining external funds, the business owners cited a variety of reasons: lack of awareness about funding opportunities, a desire to avoid the burden of interest payment, and procedural hassles. Several reported having been denied loans on the grounds on insufficient experience, absence of collaterals, and poor quality proposal statements. Over20% believed that loans are provided only to people with powerful connections. Even those who have applied and obtained external funding from banks or micro-financing bodies complained of elaborate documentation, slow and complicated process, and inability to understand the modus operandi due to lack of financial education.
Low access to loans tend to make women entrepreneurs invest in businesses that require low capital investment and avoid scaling up through big investments and the latest knowhow. On a related note, 60% of the sample surveyed reported minimal use of digital technology to handle and promote their business.
Entrepreneurs recommended a variety of reforms such as simplified and expedited process of loan application and disbursement, efforts to build awareness regarding Government schemes for women entrepreneurs through panchayats, post offices, and other government platforms, and greater transparency in the funding processes. An ecosystem of women stepping in as investors or mentors for women-led businesses was viewed as particularly important, as was the need for a networking site or a single point of reference for funding information for women entrepreneurs, preferably in regional languages.
“There needs to be a single platform where all the (funding-related) data would be provided.” one respondent observed,”I am currently looking for funding and I am going bonkers googling for the schemes and women-friendly funding opportunities.”
While close to one-third of the women said that the situation has improved considerably from what it was before, personal sources still remain one of the top choices for obtaining capital, chiefly for the low turnaround time. As another respondent said, “The loan facilities need to be quick…business scenarios change fast and opportunities cannot be missed due to delay in getting loans.”
The concerns raised by the study echo what has been shown by research on ‘startup sexism’, the systematic victimization of women entrepreneurs by denying them funding and mentoring opportunities. Perception of women business owners as less serious and competent, and more risk averse than their male counterparts, cause them to be sidelined by investors. However, the current trends also reveal a vicious cycle, where the low probability of getting funding, as well as lack of informational resources, is keeping women entrepreneurs away from even applying for assistance, further reducing their presence in the country’s business map.
The 2017 Global Entrepreneurship Index has shown India to make the largest improvement in rankings among all nations – moving from the 98th spot to the 69th position on the list, ranking next to only USA and UK in terms of the number of startups. India also witnessed in 2016 the launch of the Startup India Action Plan that have over 50 different schemes for funding, incubating, and promoting entrepreneurial ventures, as well as diversity-focused initiatives such as the Stree Shakti Package for Women Entrepreneurs, Bharatiya Mahalia Bank Loan, Dena Shakti Scheme, and the Annapurna Scheme. However, when it comes to women entrepreneurship, Indiaranked 49 among 54 countries in a 2017 Mastercard Index of Women Entrepreneurs, in terms of parameters such as support conditions, financial access, knowledge, and advancement outcomes. Even with funding opportunities coming up and the business environment opening itself to diversity, it may be a while before women entrepreneurs feel at par with their male counterparts, and the solution appears to lie in supplementing the welfare schemes with improvement in accessibility, financial education, mentoring facilities, and simplification of processes.
(The authors are a faculty at FORE School of Management New Delhi)