India’s women entrepreneurs are increasingly entering the formal credit ecosystem, aided by microfinance, government-backed schemes, and digital lending channels.
But beneath this progress lies a major financing imbalance: while more women are borrowing, access to sophisticated business finance remains sharply limited.
According to a recent NITI Aayog report, only 4.3 per cent of women-owned enterprises access cash credit or overdraft facilities, showing how few women entrepreneurs can secure the working-capital finance typically required for business expansion.
Rising inclusion, but shallow credit depth
This has expanded first-time access to finance for millions of women, especially in rural and semi-urban India.
However, much of this growth remains concentrated in small loans, consumption-oriented credit, micro-enterprise financing and informal or semi-formal borrowing.
This means women borrowers are entering the system, but often without access to the larger, more flexible capital products needed to scale businesses.
The missing middle: Where growth capital falls short
Complex business products such as cash credit, overdraft facilities, working-capital finance and secured commercial lending remain disproportionately out of reach.
Santosh Agarwal, chief executive officer at Paisabazaar, said lenders still prefer highly predictable business profiles.
“Self-employed borrowers often face volatile cash flows, seasonalities, thin or informal credit histories, fragmented banking trails, and other factors that lenders often perceive as higher risk,” she told Business Standard.
Adhil Shetty, chief executive officer at BankBazaar.com, told Business Standard: “Cash credit and overdrafts are underwritten on a continuous view of business performance, requiring audited financials, GST trails and collateral.”
For many women-led businesses, especially smaller or home-based enterprises, these conditions remain difficult to meet. Manasa Rajan, co-founder and chief executive officer at Jupiter Meta Labs, told Business Standard: “Banks rely on collateral and GST turnover as proxies for creditworthiness, both of which structurally disadvantage women who lease assets, reinvest informally, or run home-based businesses.”
Loveena Kansal, EVP & business head, Mega Corporation Limited, told Business Standard: “This is less about access to credit and more about access to the right structures of credit.”
Why structural barriers persist
The challenge is not merely about willingness to lend. It is rooted in how India’s financial system evaluates business risk.
Many women entrepreneurs lack ownership of land or formal assets, which remain central to collateral-backed lending.
At the same time, women-led enterprises often operate with limited GST registration, weaker formal bookkeeping and lower documented transaction histories.
Neha Juneja, co-founder of IndiaP2P, told Business Standard: “Most women entrepreneurs are concentrated in micro and small enterprises which predominantly fall in the informal economy.”
She added that traditional products like cash credit and overdraft are built around audited turnover, stock statements and banking history — metrics many women-led businesses struggle to provide despite often demonstrating stronger repayment discipline.
Can digital lending models bridge the gap?
A major shift is underway through alternative underwriting models. However, experts caution that digital underwriting alone may not fully solve larger-ticket credit constraints.
Santosh Agarwal said digitisation through eSign, eKYC and digital payment ecosystems is helping lenders better assess self-employed borrowers.
Adhil Shetty said: “Lenders are moving from collateral-based assessment to cash-flow-based underwriting, using bank statements, GST filings, and UPI transaction data.”
This shift could significantly improve access for businesses with strong digital footprints, even without traditional collateral.
Manasa Rajan said a woman entrepreneur with consistent digital commerce and payments history may already demonstrate strong creditworthiness, but these data points are still not systematically integrated into mainstream underwriting.
Loveena Kansal cautioned that while alternative underwriting is expanding inclusion, it remains more effective for smaller ticket sizes than larger working-capital products.
Neha Juneja similarly said digital trails are already proving effective, but scale remains the challenge. “The challenge is that most banks still don’t underwrite on this basis at scale,” she said.
What reforms are needed?
Experts said that future reform must move beyond first-time inclusion toward deeper credit integration. Adhil Shetty said expanding credit guarantees to working-capital products and formally recognising cash-flow-based underwriting will be critical.
Loveena Kansal said scaling women-led MSMEs requires structural lending reform. “Women entrepreneurs don’t lack creditworthiness — they lack fit-for-purpose credit design,” she said.
Neha Juneja stressed the importance of better transparency and reporting. “Once that data is reported consistently and publicly, it creates accountability,” she said.
Why this matters
India has made meaningful progress in bringing women into formal finance. But true entrepreneurial empowerment requires more than entry-level loans.
Without reforms in underwriting, product design, credit guarantees and formalisation support, women-led enterprises risk remaining financially visible but economically constrained.