Women get only 7% MSME credit: RBI ED  

Why in the News?

• The RBI has highlighted that low labour force participation among women is a significant barrier to financial inclusion and broader economic growth.
  • It pointed out that only 7% of the outstanding loans to micro, small, and medium enterprises (MSMEs) are to women-led businesses.

Barriers to Financial Inclusion

• Economic Participation: RBI emphasized that greater participation of women in economic activities is essential for financial inclusion and economic growth.
• Participation Disparity: Official data shows female labor force participation at 32.8% in FY22, compared to over 77% for men.
• Credit Disparity: Women-led businesses constitute nearly a fifth of MSMEs, yet they receive only 7% of the outstanding credit to this sector, highlighting a significant disparity.

Efforts and Challenges in Financial Inclusion

• Successes: RBI expressed satisfaction with access to financial services, citing the success of the Pradhan Mantri Jan-Dhan Yojana (PMJDY) scheme and social security transfers.
• Addressing Demand-side Issues: While supply-side challenges have been addressed, demand-side issues still need attention.
• Structural Barriers: Structural issues such as low levels of capital, labour participation, societal norms restricting women from inheriting property, and limited access to education and training impede women’s financial inclusion.

Stereotyping and Behavioral Issues

• Higher Risk Perception: Nigam noted that women borrowers often face stereotyping by financiers, being considered higher risks, leading to higher interest rates, greater insistence on collateral, or outright loan rejections.
• Behavioural Challenges: He also mentioned behavioural issues among women borrowers, such as being more risk-averse, less confident in negotiating loan terms, and less likely to apply for new loans due to fear of rejection.