Expanding women's access to credit key to inclusive economic growth

Optimism implicit in the ASUSE data should not suggest a dynamic change in women's participation rate in the workforce swot

If proof were needed of the positive reinforcement between women’s business ownership and women’s employment, it can be found in the Annual Survey of Unincorporated Sector Enterprises (ASUSE) for January-December 2025 released by the National Statistics Office (NSO). In India’s urban unincorporated sector, the survey shows a remarkable correlation between women’s enterprise and women’s employment across 46 million-plus cities (with populations over one million). In Greater Visakhapatnam, for example, women owned roughly 31 per cent of the businesses — and accounted for 42.5 per cent of the workforce. In Surat, the corresponding numbers are 43.2 and 41.4 per cent. 

Interestingly, an analysis of the granular data by Business Standard shows that informal economies built around trade rather than manufacturing and services are the ones that exclude women the most. In the eight most trade-dependent cities in the survey, women account for less than 20 per cent of the workforce. This is true for national capital Delhi, where women own just 16.2 per cent of the businesses and account for about 13 per cent of the workforce. Srinagar figures at the bottom of the table, with women owning 9.9 per cent of the businesses and accounting for a little over 10 per cent of the workforce. 

The message from these findings is clear: The higher the presence of women in business, the better the chances of women being employed. But the optimism implicit in the ASUSE data should not suggest a dynamic change in women’s participation rate in the workforce. Nor should a concurrent finding that female labour workforce participation had climbed to an eight-year high across India’s 46 million-plus cities. In fact, given that this figure has risen from 19.8 per cent in 2018 to 27.2 per cent in 2025, it shows that the gender divide remains still distressingly wide. This gap extends to average monthly wages and earnings as well — ₹7,000 a month for salaried people and a whopping ₹17,000 for self-employed. Ergo: Gender discrimination is alive and well in 21st century India. 

The data on women’s business ownership in the informal sector does, however, offer scope for imaginative well-tailored policy interventions to improve women’s access to business finance. One example of a well-meaning failure in this respect was the short-lived Bharatiya Mahila Bank. It was inaugurated in November 2013 and merged with State Bank of India (SBI) in April 2017. The problem was that the Bharatiya Mahila Bank started without much planning beyond a vague need to assuage national outrage over women safety, following a brutal gang rape in the capital in December 2012. The bank was headed and run by women and lent exclusively to women for kitchen makeovers, spas, beauty parlours, day care centres and the like. All these are the sort of businesses that society “approves” for women to engage in. What if a woman wanted to invest in, say, an e-commerce startup, an auto component unit or a drug manufacturing set-up? 

In any case, it turned out that scores of other state-owned banks had women-centric branches that lent far larger sums for similar activities at lower cost. According to the Press Information Bureau, the Bharatiya Mahila Bank disbursed just ₹192 crore to women borrowers compared with SBI’s ₹46,000 crore through exclusive all-women branches. “For the same cost, a much higher volume of loans to women could be given through SBI,” the PIB sagely observed. 

But the Bharatiya Mahila Bank reflected a failure of the imagination to customise lending norms for women. For all SBI and other public sector banks’ impressive metrics in female financial inclusion, the market for institutional credit for women is thin on the ground. An article in the Economic and Political Weekly (EPW) on financial inclusion of women in India said the credit-to-deposit ratio for women was only 43 per cent, compared to 93 per cent for men. In fact, in well-banked regions, the EPW article added, the gender divide on credit access was wider. 

What’s the problem? Cumbersome banking norms feed the institutional bias against lending to women. In India, women face unique barriers principally because of their subordinate social status. They tend to have less collateral (such as land or buildings) in their name, for instance. Although schemes like the Jan Dhan Yojana saw a surge in women-owned bank accounts, women appear to have inadequate control over their accounts — many such accounts are inactive or hold small balances. This may explain why women predominate in the micro-finance and informal lending economy, where rules are better adapted to women’s financial situation and the fact that women make better borrowers. 

There is a depressing irony embedded in this paradigm. Even as women struggle against financial and employment exclusion, they continue to be viewed as potentially lucrative economic entities in India’s vibrant marriage economy. But instead of enhancing their agency, this status makes them uniquely vulnerable to persecution and murder by venal husbands and in-laws. Thus, well into the third decade of the 21st century, the media still reports shocking accounts of dowry murders — inflicted not by poor people but educated middle class families, who should, by rights, be at the forefront of women’s rights in India. These headlines suggest that the need for more women to be more financially independent has never been more urgent.