India’s women-led micro, small and medium enterprises (MSMEs) face systemic financial, digital and institutional barriers despite their growing role in employment generation, according to a new report by Pahlé India Foundation (PIF). It found that women own only about 15 million of India’s 63 million MSMEs and remain concentrated in micro-scale, low-margin sectors such as textiles, food and handicrafts.
Notably, these firms account for just 20.44 per cent of micro, 5.26 per cent of small, and 2.77 per cent of medium enterprises. The study, conducted across six states, Chhattisgarh, Gujarat, Maharashtra, Odisha, Tamil Nadu and Uttar Pradesh, shows how entrenched gender norms, limited credit access, digital exclusion and inadequate policy support continue to constrain women’s participation in India’s most employment-intensive sector.
“Despite the MSME sector being the backbone of India’s economy, female participation remains disproportionately low. “Bridging gender gaps in entrepreneurship is essential to realising the vision of Viksit Bharat by 2047," said Rajiv Kumar, Chairperson, Pahlé India Foundation.
Credit Gap And Financial Barriers
The report estimates a credit gap of between USD 1.4 trillion and USD 1.7 trillion for women-led MSMEs. Nearly 90 per cent of women-owned firms have never accessed formal credit, relying instead on informal sources with higher interest rates.
Although financial inclusion schemes such as the Pradhan Mantri Jan Dhan Yojana (PMJDY) have virtually eliminated the gender gap in bank account ownership, a 9 per cent disparity in account usage persists. Only 32 per cent of women actively use their accounts compared to 23 per cent of men, limiting transaction histories that underpin credit eligibility.
On the supply side, banks often perceive women borrowers as riskier due to limited credit histories and small loan sizes. On the demand side, women entrepreneurs face low financial literacy, a lack of collateral, and time constraints due to unpaid household work. Credit received by women is only 27 per cent of the deposits they contribute, compared to 52 per cent for men, the report said, adding that women’s per capita savings are higher and default risks lower—yet they remain underserved by formal institutions.
In an interview with BW Businessworld in June 2025, Nirupama Soundararajan, Co-founder and Chief Executive Officer (CEO), Policy Consensus Centre, said, "The funding gaps are huge even today and the social support still requires a significant mindset change. The burden of care still predominantly rests with the woman, which means, without social and family support, any scaling is often seen as putting money over family."
Experts say credit policies are no longer inherently biased against women, with non-collateralised loans like Mudra improving access. However, final loan approvals still depend on individual bankers, limiting policy impact. A Sidbi-Crisil report estimates a 35 per cent funding gap between male and female-led enterprises, despite lower NPAs for women borrowers. Experts recommend continued policy focus on women-led businesses, potentially via sub-targets under priority sector lending.
In India’s formal banking sector, the share of outstanding MSME credit extended to women-owned enterprises remains modest, just 7.09 per cent as of 31 March 2023, according to the Reserve Bank of India. Meanwhile, a recent global inclusion report showed the scale of the financing gap faced by women entrepreneurs: women-led MSMEs account for approximately 20.5 per cent of registered MSMEs, yet they face an estimated USD 158 billion credit shortfall as of 2024.
Skilling Without Employment
India’s female labour force participation stands at 41.7 per cent, far below men’s 78.8 per cent. The study noted that women trainees are 13 per cent less likely than men to receive job offers after skilling and 26 per cent less likely to accept them, often due to family-related constraints.
Women remain concentrated in low-paying sectors such as tailoring and beauty services, with limited presence in high-growth industries like technology and engineering. The report calls for a shift from technical training to “holistic entrepreneurship development”, integrating digital, business and life skills.
It recommends childcare facilities, safe transport and post-training mentorship to boost retention and outcomes for women trainees. Last year, Nidhi Bhasin, Chief Executive Officer (CEO), Nasscom Foundation, told BW Businessworld that obstacles such as gender bias, lack of digital literacy and balancing work and family responsibilities are hindering women-led MSMEs from fully realising their potential in this industry.
"While there is a growing presence of industry bodies, NGOs, and women empowerment councils dedicated to empowering women entrepreneurs, access to technology and digital literacy remains a key hurdle, especially in the rural areas," Bhasin stated. The report stated that women’s economic empowerment is indispensable to India’s ambition of becoming a developed nation by 2047.
Expanding the role of women in MSMEs could add as much as USD 0.7 trillion to India’s gross domestic product (GDP), the foundation said, citing McKinsey Global Institute estimates. “Women entrepreneurs are not just business owners; they are change-makers transforming communities,” the report said. “A gender-intentional approach to MSME development can unlock growth, equity, and inclusion across India’s economy.”
Market Access And The Digital Divide
Women-led enterprises also face significant barriers to market integration. Female entrepreneurs in rural areas report lower sales expectations than men and limited access to procurement networks or market intelligence. While 8 per cent of sellers on the Government e-Marketplace (GeM) are women, private sector procurement remains negligible, with women receiving just 1 per cent of multinational corporations’ USD 4 trillion annual procurement spend, the study said.
Digital platforms such as ONDC, Niti Aayog’s Women Entrepreneurship Platform, and Udyam Sakhi have created new avenues for women to connect with buyers and scale businesses. However, persistent digital inequities continue to block progress—Indian women are 15 per cent less likely to own a mobile phone and 33 per cent less likely to use mobile internet than men.
“Bridging the digital divide is critical,” the foundation noted. “Women entrepreneurs cannot fully leverage e-commerce opportunities without affordable connectivity, digital literacy, and access to digital marketing tools.” The report also criticised the lack of up-to-date, gender-disaggregated MSME data, which prevents policymakers from designing targeted interventions. The last comprehensive dataset dates back to 2015-16.
Despite several state and central schemes, women often struggle with complex compliance procedures and lack awareness about available incentives. Only a few states, such as Maharashtra and Uttar Pradesh, operate single-window approval systems like Maitri and Nivesh Mitra, which make registrations and applications more transparent.
Tide India's Bharat Women Aspiration Index (BWAI) 2024 revealed that about 95 per cent of Indian women are unaware of existing government financial schemes or initiatives to leverage for their business. The report mentioned that this indicates women are turning to the informal sector for access to credit. About 52 per cent of women entrepreneurs have access to financial credit, indicating that one in two entrepreneurs has access to finance, while 47 per cent said they face challenges, it stated.
The same index in 2025 stated that despite their growing role in shaping India’s economy, women entrepreneurs in Bharat’s smaller cities remain cut off from critical peer support and growth ecosystems. It added that a striking 86 per cent of women entrepreneurs either rarely or never participate in any business networks, significantly hampering their business expansion, access to funding, and mentorship opportunities.
Interestingly, Union Finance Minister Nirmala Sitharaman has urged women to come out and take advantage of the government's programs. However, the PIF study also found inefficiencies in existing welfare programmes, citing underutilised funds and duplication of beneficiaries in some schemes. It recommended greater female representation in MSME advisory boards and credit review panels, gender-responsive lending frameworks, and integration of financial services with digital platforms frequently used by women, such as ecommerce portals.
It also proposed a framework for change that focuses on four key areas. First, financial inclusion through collateral-free digital lending and gender-sensitive banking practices aims to improve women entrepreneurs’ access to capital. Second, skill development combines business, life, and market-oriented training to strengthen capabilities. Third, market access is enhanced through public procurement reforms, digital onboarding support, and partnerships with e-commerce platforms. Finally, policy support involves gender-disaggregated data collection, regulatory simplification, and greater institutional representation to ensure an enabling environment for women-led enterprises. |
