Priority sector tag needed for women-led rural enterprises: World Bank

Recommends institutional reforms to support growth and contribution of women's entrepreneurship

India needs to assign a specific priority sector tag for women-led rural enterprises for easier access to credit, according to a study by the World Bank.

The study notes that the proposed initiative will promote women-owned growth-oriented enterprises to boost female labour force participation (FLFP). 

“While micro-enterprise financing is covered under the priority sector, the loans are mostly provided to enterprises at the upper edge of the spectrum (i.e., enterprises closer to the ~5 crore turnover mark). The loans to women’s enterprises are presently not prioritised separately. There is a need to further sub-segment the micro-enterprise category focusing on women-owned growth-oriented enterprises to encourage commercial banks,” says the World Bank working paper authored by Arshia Gupta, Alreena Renita Pinto and Balakrishnan Madhavan Kutty.

 

The authors pointed out that efforts by both government and non-government sectors in India to support women's enterprises mostly focus on basic subsistence enterprises, rather than identifying and actively supporting businesses with growth potential. “Women-owned growth enterprises are also important entities to address the declining FLFP in rural India by creating more jobs for women,” they said.

The study also recommends introducing growth-oriented women’s enterprises to commercial loans, which, apart from addressing the credit needs, will help in establishing the creditworthiness of the enterprise for availing of future loans.  

It suggests that investments be made to promote digital bookkeeping and payment solutions and build the capacities of women-owned enterprises to adopt these solutions. This will allow tracking of enterprise cash flows based on which financing products can be developed.

“Learning from international experience, graduation programmes for enterprises that have a sound history of repaying micro-loans to mainstream commercial finance could also be developed. The adoption of digital solutions will help in developing sector-specific benchmarks for assessing enterprise performance, providing customised support services, and lending. District-level data analytics could provide the key stakeholders, including banks, with opportunities and associated risks. This will enable data to be used for a decision support system rather than a centralised policy input alone,” the report added.

The study further recommended institutional reforms to support the growth and contribution of women's entrepreneurship. It emphasised the need to strengthen decentralised incubation centres, develop women's entrepreneur associations, and enhance avenues for institutional procurement. These reforms aim to provide targeted support and resources, enabling women's entrepreneurship to contribute to job creation and income generation.

Commenting on the report, Rituparna Chakraborty, co-founder, Teamlease Services, said that growth-oriented enterprises were more beneficial than subsistence enterprises, and giving priority sector lending status to women-led growth enterprises would significantly aid in job creation and economic development.

"Initiatives such as granting priority sector status to women-led enterprises are far more impactful than programmes like MGNREGA in enhancing employment opportunities for women," she added.