How fintechs can help catalyze the growth of women-led SMEs in India


While the world is excited about Nykaa’s IPO and the success story of its founder Falguni Nayar, two key facts need to be considered, this is the first woman-led startup that has gone public. in India, and secondly, it is one of the few Indian startups founded by women to achieve unicorn status.

While this is a big step in the right direction, we might want to ask ourselves why it took so long for a women-led, capital-efficient start-up to accomplish this feat, when several start-ups -up run by men achieved this status a long time ago.

Some of the answers to these questions can be found in the 2020 MasterCard Female Entrepreneur Index which shows that there are only 15 female entrepreneurs in India for every 100 executives in total.

Also read: MPW: Why women remain a minority in the startup ecosystem in India

India fell into the ranks of the 10 countries with the lowest female labor force participation rate (FLFP), to just over 20 percent, even as labor force participation (LFP) of males was recorded at 76 percent.

However, we can say with certainty that there is hope and we need to actively work on creating opportunities for women entrepreneurs in India for the situation to improve.

Although the funding gap is one of the critical points for women-led SMEs, the fintech ecosystem can help unlock their potential not only by bridging this gap, but by meeting several non-financial needs that need to be met. .

Closing the funding gap with data

According to experts, the financing gap for women-owned small businesses in India is $ 158 billion as most women-run businesses have to finance themselves or opt for informal lending options as banks and other financial institutions remain uncertain of business models and the potential or guaranteed returns on loans.

One of the main obstacles to financial institutions supporting women entrepreneurs is the lack of reliable data disaggregated by sex.

According to a World Bank report, women entrepreneurs in India face a rejection rate of 19% by credit institutions in India – more than double the rate of 8% for men.

While government and formal financial institutions have launched programs to address the specific business needs of women-owned businesses, a lack of awareness and awareness – especially in rural areas – has limited the impact.

There is a need for regional assessments that provide granular information on trends in access to financial products for women entrepreneurs.

Most formal financial institutions need to assess credit history before lending, however, fintechs with their custom API-based platforms and AI / ML algorithms can access many alternative data sources (TPS, mobile data , social, statutory payments, scoring quality leads, litigation, etc.) and analyze them across thousands of data points, making underwriting and credit reporting robust and easier for lenders.

Fintechs can step in to help them quickly calculate their creditworthiness, and thus allow them to access quick and hassle-free credit options.

Also read: Why it makes sense to invest in startups led by women

Foster diversity through mentoring and counseling

The 2020 MasterCard Women Entrepreneur Index also shows that over 60% of Indian women entrepreneurs rarely see opportunities.

As an ecosystem, we need to foster diversity because it is crucial for holistic growth and helps all aspects of the business. The focus of fintechs on women as a segment should be greater and this can be achieved by sponsoring more and more women during their entrepreneurial journey, it is no longer enough to just encourage them.

Fintechs should become incubators for small businesses run by women and undertake start-up services such as business planning assistance, preparatory work support, basic advisory services, awareness of financial programs government-led or institutional, etc. experts.

One on one support can also be provided to help people understand the basics of creating a business strategy or even something as crucial as filling out a loan application form.

These are small but important steps that can help women entrepreneurs get through the most difficult start-up phases of their business.

Fintechs must offer these SMEs the solution to manage financial administration on one platform and reduce their dependence on others, this will help SMEs save time and money to do business and promote growth.

Accounting and financial planning

Most small and medium-sized businesses, by their nature, will experience seasonal ups and downs; uncertainty is something that cannot be completely ruled out and hence they have to properly manage their cash flow.

Fintechs can use reliable credit risk models that can help women-run businesses improve their financial planning knowledge.

By setting up internal mentor panels, fintechs can help small, female-led businesses learn to forecast short-term cash flow, cash crunch, negative cash flow trends, and unexpected expenses or unforeseen events, right down to the repository bases. tax returns, GST, invoicing, payroll management, etc. These services can be extended beyond the financial products we offer.

Peer training and networking

For most entrepreneurs, a strong network and a reliable team are the main catalysts for their success.

A 2017 report by Inc. indicates that 48% of female founders say that the lack of available advisers and mentors limits their professional growth. This is exactly where support groups and networks come in.

Networks are extremely valuable because there is a world of shared value to be shared – people are often drawn to stories that tell them about their experiences.

With most business networks in India dominated by men, women business owners find themselves very poorly supported.

Fintechs in the ecosystem could work on creating a directory for women entrepreneurs that will function as a strong network for any female founder looking to get started, given that there are a handful of such networks in India.

This directory should include a representative sample of women such as entrepreneurs, bankers, financial advisers, advisers, etc. as well as female founders at different stages of business maturity in terms of size, income and growth prospects.

A strong network will help women entrepreneurs access some of the most powerful tools available to grow their businesses.

Marketing and sales

It’s time for women entrepreneurs to get that well-deserved spotlight on them, it’s time for them to be the heroine of their own business.

In addition to working with women-focused SME groups as part of our Women in Business initiative, we also celebrate entrepreneurship by making them our brand ambassadors through our marketing and advertising campaigns.

Women entrepreneurs need to promote their own businesses through marketing and digital campaigns because no one knows their business better than they do.

Being authentic is by far the most important virtue to be successful, and what could be more effective than getting started.

Closing thoughts

Defending the cause of small businesses run by women and enabling them to offer innovative financial products focused on women is the need of the day.

I would like to appeal to Women Founders, that if you are one of the few who are successful, contact your peers who may be looking for expert advice and advice from your experience. Besides raising our voices to prejudice, supporting each other throughout the journey is the only way to start to make an impact.


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