India’s next growth story needs more credit for women-led businesses

For years, India’s data has been pointing to a crucial fact that has been overlooked - women-led mid-market businesses are a highly disciplined and capital-efficient segment of the country’s emerging business class. This fact is being neglected due to the financial system not being designed with these businesses in mind. Over 55% of Jan Dhan accounts belong to women, and they own more than 20% of India’s MSMEs, according to the Ministry of Finance and a report by Niti Aayog.

Women borrowers also constituted 99% of the total clientele of MFIs, as per The Bharat Microfinance Report 2024. The International Finance Corporation estimates the credit gap for women-owned MSMEs in India at over $150 billion, which is a significant structural opportunity.

The focus should be on businesses with GST records, established cash flows, and real operating histories, in the Rs 5-50 crore range. These founders have proven themselves through the toughest times and have thrived. However, the credit system has not evolved to support their scaling-up needs. The credit system currently relies on traditional business models, which often require collateral and default history, both of which may not accurately represent women-led businesses.

These businesses demonstrate stronger repayment discipline, conservative capital deployment, and sustainable growth patterns, making them lower-risk investments. Therefore, the credit system needs to move beyond collateral as the primary lens of creditworthiness. Instead, it should focus on cash flow analysis, GST data, and supply chain linkages to get a more accurate picture of a business's risk profile.

Additionally, product design needs to be tailored to the specific realities of women-led businesses. Seasonal businesses, for instance, cannot be forced into equal monthly instalments designed for manufacturers. Repayment structures should reflect the different working capital cycles across sectors rather than overriding them. Financial institutions should also proactively engage with entrepreneurs who are already embedded in industry networks, platforms, and trade bodies.

This is not about special treatment but about smart product design that accurately reflects the needs of these businesses.

By doing so, financial institutions can build more resilient, better diversified portfolios positioned for India’s next decade of growth. Women-led enterprises will play a significant role in this expansion, regardless of formal finance's involvement. The choice, then, is whether to be part of this story or to help shape it. Designing financial systems for the edges, rather than an imagined average borrower, leads to better, more accurate, and more resilient systems overall. Inclusion, in this context, is a proof that the design works.