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How fintechs can help catalyse growth for women-led SMEs in India

How fintechs can help catalyse growth for women-led SMEs in India

Fintechs in the ecosystem could work towards creating a directory for women entrepreneurs that will work as a robust network for any woman founder looking to start out, considering there are a handful of such networks in India.

With most business networks in India dominated by men, women business owners find themselves highly unsupported. With most business networks in India dominated by men, women business owners find themselves highly unsupported.

While the world is gung-ho about Nykaa's IPO listing and its founder Falguni Nayar's success story, one must ponder two critical facts, it is the first woman-led startup that went public in India, and secondly, it is one of the few Indian women-founded startups to attain unicorn status. 

Although this is a huge step in the right direction, we might want to question ourselves as to why it took a women-led capital-efficient startup so long to accomplish this feat, while several male-led startups reached this status long ago.   

Some of the answers to these questions lie in the 2020 MasterCard Index of Women Entrepreneurs that shows there are only up to 15 female business leaders in India for every 100 total leaders. 

Also Read: MPW: Why Women Remain a Minority in India's Startup Ecosystem 

India has fallen into the ranks of the 10 countries constituting the lowest Female Labour Force Participation (FLFP) rate, at a little over 20 per cent, even as Labour Force Participation (LFP) for men was recorded at 76 per cent. 

However, we can safely say that there is hope, and we have to work actively towards creating opportunities for women entrepreneurs in India for the situation to improve.   

While the financing gap is one of the crucial pain points for women-led SMEs, the fintech ecosystem can help unleash their potential by not just bridging this gap, but by meeting several non-financial needs that need to be addressed.   

Bridging the financing gap through data   

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

One of the biggest barriers to financial institutions supporting women entrepreneurs is the lack of reliable data segregated by gender. 

As per a World Bank report, woman entrepreneurs in India face a rejection rate of 19 per cent by lending institutions in India - more than twice the rate of 8 per cent for men. 

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

There is a need for regional assessments that provide granular insights into the trends around access to financial products for women entrepreneurs. 

Most formal financial institutions need to assess credit history before lending, however, fintechs with their custom-built API-based platforms and AI/ML algorithms can access numerous alternative sources of data (GST, mobile data, social, statutory payments, quality lead scoring, litigations, etc.) and analyse them through thousands of data points, making credit underwriting and assessment robust and easier for lenders. 

Fintechs can step in to help in the rapid calculation of their creditworthiness, and thus let them access hassle-free and quick credit options.

Also Read: Why it makes business sense to invest in women-led startups

Foster diversity through mentoring and advisory  

The 2020 MasterCard Index of Women Entrepreneurs also states that more than 60 per cent of Indian women entrepreneurs rarely see opportunity. 

As an ecosystem, we need to foster diversity, as it is crucial for holistic growth and helps all aspects of the business. Fintechs' focus on women as a segment should be higher and that can be achieved through mentoring more and more women while on their entrepreneurial journey, simply encouraging them is not enough anymore. 

Fintechs should become incubators for women-led small businesses and undertake start-out services like business planning assistance, groundwork support, basic advisory services, creating awareness of government-led or institutional financial schemes, etc. through masterclasses, workshops, and AMA sessions with experts. 

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

These are small but important steps that can help women entrepreneurs tide through the most difficult teething phases of their businesses. 

Fintechs must offer these SMEs the solution to manage financial admin on one platform, and reduce their dependence on others, this will help SMEs save time and money on doing businesses and foster growth.   

Accountancy and Financial Planning  

Most small and medium enterprises, by their very nature, will have seasonal ups and downs; uncertainty is something that cannot be ruled out completely, and hence they must manage their cash flow correctly. 

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

By setting up in-house mentor panels, fintechs can help women-led small businesses learn how to forecast short-term cash flow, liquidity crunch, negative cash flow trends, and unplanned or unexpected expenses, all the way through to the basics of filing tax returns, GST, invoicing, managing payroll, etc. These services can be extended over and above the financial products we offer.   

Peer training and networking  

For most entrepreneurs, a robust network and a dependable team are major catalysts for their success. 

A 2017-report by Inc. said 48% of women founders report that a lack of available advisors and mentors limits their professional growth. This is exactly where support groups and networks come into play. 

Networks are immensely valuable as there is a world of shared value to be exchanged - people are often drawn to stories that teach them about their experiences. 

With most business networks in India dominated by men, women business owners find themselves highly unsupported. 

Fintechs in the ecosystem could work towards creating a directory for women entrepreneurs that will work as a robust network for any woman founder looking to start out, considering there are a handful of such networks in India.   

This directory must comprise a cross-section of women like entrepreneurs, bankers, financial advisors, counsellors, etc. along with women founders from different stages of business maturity in terms of size, revenues, and growth prospects. 

A robust network will help womenpreneurs access some of the most powerful tools available to scale their businesses.  

Marketing and Sales  

It's time for womenpreneurs to have that much-deserved spotlight shine on them, it's time for them to be the heroine of their own business venture. 

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 across our marketing and advertising campaigns. 

Womenpreneurs should promote their own businesses through self-facing marketing and digital campaigns since no one knows their business better than them. 

Being authentic is, by far, the most important virtue of being successful, and what's more effective than putting yourself out there to do it.   

Closing Thoughts  

Championing the cause of women-led small businesses and enabling them with pioneering women-centric financial products is the need of the day.

I would like to appeal to women founders, that if you're one of the successful few, reach out to your peers who may be seeking expert advice and guidance from your experience. In addition to raising our voices to biases, supporting each other through the journey is the only way we can start making an impact.