Women as borrowers

Finance needs to find female-targeted products

March 8, Friday, was the International Women’s Day. This is an appropriate occasion to consider the barriers to creating greater equality between the genders in India, which is, by many standards, among the most patriarchal societies and countries in the world. In particular, India has an abysmally low female participation rate in the workforce — and one that, according to many studies, may be dipping lower. Nor is the female labour participation rate satisfactory, or growing, even in the sub-sectors of the “formal” economy where many might have believed the most restrictive social norms might not apply. It is far from clear how policymakers could address this continuing issue. Mere education is not enough — other forms of positive discrimination within the economy in order to ensure that there is a level playing field for both genders are needed. 

It is in the context of this apparently intractable problem that a recent report on credit to women from Transunion Cibil, a credit information company, needs to be seen. It appears that lending to women is growing faster than lending to men. Cibil has reported that 8.6 million new female borrowers are opening loan accounts every year — though mostly from Maharashtra and the south. They are a large source of growth in the personal loan market as well, with double-digit growth for female borrowers in every relevant segment. Business loans are another source of female empowerment within the economy. States that have a high proportion of medium, small and micro enterprises (MSMEs) owned by women also turn out to have a large number of business loans being given to women. Further, 38 per cent of women borrowers, according to Cibil, monitor their credit score regularly — a number that increases the older they get. This may not be enough in an ideal world, but is still an improvement.

There are many proposals that have been floated to increase the number of women in the workforce. A World Bank study last year determined that social conditions make it particularly difficult to increase this proportion. It is obviously necessary to improve law and order so that getting to work is easier for women, and many larger corporations will have to put into place policies and schemes that are targeted towards making it easier for women to work. There are several proposals, for example, paying for maternity leave or child care, including burden-sharing between the employer and the government. That is an important and necessary discussion. However, in the course of that discussion, the possibilities from female self-employment and entrepreneurship should not be forgotten. For that to work, it will be necessary to customise products and services, looking at the credit requirements for women. It is clearly an important direction for the financial business in general. If conventional commercial banks miss out on this important and growing segment of the market, there is little doubt that new financial technology firms will step in. So it is in the best interests of legacy finance itself to step up and consider how best to target this under-served category. In the past, credit for women has largely been tokenism under another guise — pink credit cards, for example, or wedding-related credit services. This approach needs to be re-jigged, taking into account women’s increasingly important role as entrepreneurs and the fact that the data reveals that they are by and large good credit risks. This was also the lesson from microfinance attempts over the past decades. Legacy finance needs to pay closer attention to the lessons of microfinance, including self-help groups — what are the methods by which repayment risk can be reduced for women, in particular, allowing for cheaper credit to be targeted at them? Internationally, there are funds that are specialised only for women-led ventures. India needs such an ecosystem.

Overall, it is clear that government attention needs to be focused on this growing phenomenon. Anything that increases female economic independence is important, particularly in that it will enable the slow social transition away from patriarchy.