Promoting women-owned SMEs: Interview with Kalpana Ajayan, Regional Head- South Asia, Women’s World Banking 

By Puja Sharma

Kalpana Ajayan is the Regional Head, of South Asia and comes with 25+ years of experience in financial services in retail banking and Insurance.

Ajayan is passionate about supporting women’s empowerment and in an individual capacity is a certified mental health counselor for low-income women and an advisor to key not-for-profits in India.

She has worked in organizations like Citibank, HSBC, and Edelweiss Financial Services in various roles across functions.

IBS Intelligence discussed with Ajayan how WWB works with regulators, financial services providers, and FinTech companies to help them understand women’s needs throughout their business life cycle.

What is a women’s digital financial inclusion hub?

There is a gender gap in access to digital technology, skills, and financial products. Women face additional challenges in accessing financial services. A lack of digital skills is an important barrier to access to the internet, with 45% of non-internet users citing this as a key reason they do not use the internet, as per a World Wide Web Foundation report. Digital literacy was found to be a particular barrier for women in rural areas, with half of the non-internet users saying a lack of know-how kept them offline, compared with 45% of rural men.

Women’s Digital Financial Inclusion (WDFI) Advocacy Hub is a global coalition by United Nations Capital Development Fund (UNCDF) in partnership with Women’s World Banking to catalyze collective action through unifying local, regional, and global stakeholders with the common objective to increase women’s digital financial inclusion. The coalition advocates to provide access to technology, skills, and digital financial services. They also work to collect data about women entrepreneurs to track WDFI progress and develop leading indicators based on both global and local existing data.

What are the challenges faced by women entrepreneurs today?

MSMEs owned by women face greater barriers in terms of limitations on time, mobility, resources, and cultural and social constraints compared to their male counterparts.  Consequently, their businesses are often informal, home-based, small in scale, and concentrated in the sectors traditionally assigned to women.

Lack of access to capital is their biggest constraint in running their businesses. IFC has estimated that worldwide, women-owned small businesses and more than 70% of women-owned small and medium enterprises have inadequate or no access to financial services. Largely, their enterprises are unregistered, cash-based, or have no banking or credit history.

In India, there are an estimated 100 million MSMEs of which only 18% are owned by women. Nearly 90% of these are in microenterprises. The majority of women-owned MSMEs – 95.6% – are unregistered, leading to less than 10% of the entire segment having access to finance.

Some of the reasons for this inequity are listed below:

• They do not approach formal finance, and if they do, they do not get access to credit due to a lack of collateral and credit histories.
• They generally have less access to opportunities for networking and mentorship.
• They also face disproportionate challenges due to caregiving responsibilities, greater vulnerability to financial shocks, and restricted access to information and technical skills.
• They are less likely to have access to digital financial services.
• They are also likely to be discouraged from taking a loan due to fear of rejection.

How can FinTech innovation and modern digital banking help women-led businesses?

FinTech can use the power of digital tools such as mobile phones and smart devices to reach women customers in far-reaching places and those in rural areas, efficiently. Where women have access to their phones, digitalization offers gains in terms of reduced costs, profitability, greater geographical reach, and acquiring new customers. However, given the persistent systemic barriers faced by women MSMEs, they are not able to equally benefit from the use of digital technologies. There is a gender divide in access, usage, and uptake of ICT, digital platforms, and digital financial services.

Herein, FinTech innovation and modern digital banking can revolutionize how women access credit. The lack of large, digitized data, proof of income, or credit history makes it hard to underwrite risk among certain population groups such as women, MSMEs, and those in the informal sector.

The use of Artificial intelligence (AI) and Machine Learning (ML) in the credit ecosystem could create a level-playing field for women borrowers that is inclusive and fair while being efficient. With AI/ML-based algorithms, there is an opportunity to create alternative credit scores that allow underwriting loans to customers with no or thin credit files. Using its own data and financial performance data, FinTech can lend to women-owned MSMEs than simply relying on collateral.

 Why should financial institutions focus on building women’s digital and financial “capability” and not simply financial or digital literacy?

To enable women to understand financial products and services and to make better financial decisions, it is necessary to shift the focus from building their digital and financial ‘literacy’ to building their digital and financial ‘capability’ (DFC). It is the knowledge, attitudes, and skills that enable a person to actively use digital financial services. This “capability” then helps increase the capacity of customers to engage with financial services.

Strengthening DFC is integral to enhancing both customer and business outcomes. From the perspective of the customer, solutions that increase DFC empower women to strengthen their understanding, confidence, and abilities — and allow them to effectively use formal financial products on their terms. This in turn increases the usage of financial products and services, which is beneficial to the financial services providers. Product adoption and usage by women customers improve their business outcomes.

 How can financial institutions empower women-led MSMEs from interior India and create inclusivity?

Women-led businesses are largely nano or micro in nature, often informal, home-based, small in scale, and concentrated in the sectors traditionally assigned to women. Many are boot-strapped or borrow from friends and family. To empower women-led businesses from the last mile or the bottom of the pyramid, which is also inclusive, requires policies and programs that are designed to impact women; relevant products that are equitable; and requisite awareness and communication to drive demand and adoption.

SIDBI is currently offering affordable credit to women (INR 1 lakh 5 lakhs) under its PRAYAAS scheme. These loans are delivered through SIDBI’s partnerships with microfinance institutions and NGOs, and a corpus of Rs 1000 crore is dedicated to this initiative, reaching 80,000 women beneficiaries. Women’s World Banking is working with SIDBI to build the capacities of Self-Help Groups to identify worthy borrowers who can move from group to individual loans and engage with them in the loan recovery process.

In addition, India’s Digital Public Infrastructure (DPI) for commerce- the Open Network for Digital Commerce, is meant to be a great equalizer to bring together sellers, buyers, and creditors, and facilitate easy business between hinterland entrepreneurs and city-based retail businesses.

What is the future of women MSMEs and how can organizations like WWB help accelerate the process?

MSMEs are the country’s economic growth engines. India has over 16 million women-led enterprises which are primarily micro businesses, but they are one of the fastest-growing segments. Of these 16 million enterprises, only about 10% are registered or are availing of formal loans or have any kind of business or health insurance to prevent themselves from any financial shocks.

There is a business opportunity for banks and FSPs to work with this market – the 80% women-run enterprises who are no-file or thin-file customers – who lack credit history and are unable to obtain a higher ticket-sized loan from a formal institution at an affordable rate.

For women-owned MSMEs, monetary support is not the sole determinant of success. Non-financial support can be just as critical, offering considerable benefits for their sustainability and growth. These women entrepreneurs need solutions and enablers such as family support, Digital Financial Capabilities, market expansion support, affordable credit, and suitable insurance products to prevent them from any financial shocks.

WWB works with regulators, FSPs, FinTech, etc., to help them understand women’s needs across their business life cycle in the context of their challenges and aspirations. We use a women-centered design approach to help stakeholders design for women. Using insight-driven proofs-of-concept, we show the commercial viability and the social impact a solution can have. We take these insights to forums that have relevant stakeholders and show them the power of the women customers and the economic returns they can bring. As a member of the Global Partnership for Financial Inclusion, we are advocating for gender intentionality in DPI.

Today, with partners like SIDBI, Google Pay, SwissRe, SEWA Bank, Maharashtra State Rural Livelihood Mission, LendingKart, Arthan, and Annapurna Finance, to name a few, we are solving the challenges women entrepreneurs face through savings, credit, commerce, and digital financial services.