Challenge
Despite growing efforts to expand access to finance for women, India still lags behind in this space. While 78 percent of adults now have a bank account in India, 90 percent of female business owners in the country have never borrowed money from a formal financial institution. A range of factors contribute to this imbalance. Women legally have little or no access to collateral in India and often seek small loans that are not of interest to large banks, the SME Finance Forum has reported. Additionally, less than 25 percent of employees in commercial banks are women. As a result, women face significant barriers when applying for loans
Solution and Impact
In 2021, DFC, with support from USAID/India, signed a $25 million loan portfolio guaranty with Kotak Mahindra Bank, which has enabled Kotak to lend $50 million to non-bank financial companies for on-lending to women borrowers or to small, women-owned businesses. As these borrowers typically only request small loan sizes, lending through financial institutions focused on small business borrowers is a more efficient way to reach them. Kotak has now fully utilized the $25 million loan portfolio guaranty and has lent $50 million to 11 microfinance and non-bank financial institutions, which have in turn on-lent to nearly 56,000 businesses that are either fully owned or co-owned by women.
In December 2023, DFC and USAID visited Satin Creditcare, one of the smaller microfinance companies that provided financing to women entrepreneurs. Satin’s financing has helped numerous women, such as Meera, who lives in Haryana, a peri-urban area near New Delhi. Meera has operated her own small shop for 20 years, selling household goods, clothing, inexpensive jewelry, and other items. Since she does not have a formal credit history and her business itself is relatively informal, it would be nearly impossible for Meera to obtain financing elsewhere. Meera reported that Satin was her only option. Since receiving a loan from Satin, Meera’s business has generated income that has helped her raise her three children and allowed her to continue running her business.
This project was profiled in 2024.