Micro, Small and Medium Enterprises (MSMEs) have become instrumental in shaping India’s generating employment, creating revenue, and in global outreach. In 2024, MSMEs contributed nearly 30% to the GDP. The aim is to raise this to 35% in the current year.
This vast sector also provides opportunities for many women-led enterprises. The government has implemented several financial schemes specifically designed to promote women’s participation.
However, the issues and challenges faced by women-led MSMEs are often inadequately addressed. The problems of limited access to formal credit and the widening credit gap continue to prevent these entrepreneurs from achieving their financial goals.
While ensuring adequate credit availability to MSMEs has long been a key policy objective, gaps between banks and beneficiaries often persist at the implementation stage.
Women-owned businesses account for up to 20% of all MSMEs registered in India. This level of female participation remains low despite the handful of schemes aimed at encouraging self-employment and financial independence.
What is more striking is that women-led MSMEs contribute only about 10% of the total turnover, while receiving around 11–15% of the total investment in the sector.
The chart shows the share of women-led MSMEs, share of women employed in MSMEs, share of investment attracted by women-led MSMEs and share of turnover of women-led MSMEs
These numbers highlight the persistent gaps in both financial inclusion and credit accessibility for women in the MSME ecosystem.
According to reports by the Small Industries Development Bank of India (SIDBI), women face significant discrimination in fund disbursement, with a credit gap of around 35% — meaning that over a third of their financial requirements go unmet — compared to a the 20% credit gap faced by men. The chart shows the credit gap across genders.
The credit gap refers to the difference between the amount of credit requested by the borrower and the amount actually received. These inadequate funds are one of the major challenges for women in the MSME sector, affecting about 26% of them, followed closely by the challenge of high competition.
The Pradhan Mantri MUDRA Yojana (PMMY), launched nearly a decade ago to support individuals seeking self-employment, has also enabled women to open loan accounts and fund their MSMEs. PMMY offers collateral-free loans to MSMEs operating in the non-farm sector.
As of 2024, women owned 42,492,281 loan accounts under PMMY out of a total of 66,777,013 accounts, which is approximately 64%. This shows that women form a significant group seeking financial assistance.
However, the sanctioned amount tells a different story. Of the total ₹5,41,012.86 crore allocated for that year’s target, only ₹2,25,887.08 crore (about 41%) was directed towards women-led MSMEs. This disparity points to an economic inefficiency in delivering highly liquid, low-cost, and easily accessible loans to the underserved sections of the sector.
These underperforming schemes are pushing women to rely on informal sources of credit, which are often riskier and unreliable. These challenges are not confined to MSMEs alone; they also affect informal micro-enterprises (IMEs) run by women. Informal businesses are typically excluded from formal credit processes due to the lack of legal documentation and collateral.
To address this gap, the government launched the Udyam Assist Portal, which helps such IMEs become eligible for priority sector lending by facilitating their formal recognition.
This year, over 1.86 crore IMEs have been registered through the portal. Notably, 70.5% of these are owned by women. This achievement has significantly boosted employment, with women-led IMEs contributing 70.8% to employment generation within this segment. The chart shows the share of women-led informal micro-enterprises (IMEs) and the share of women employed in IMEs
However, despite being registered, these businesses continue to face challenges in accessing formal credit. Dr. Ashwin Ram, Professor at RV University, said the main reasons for this are lack of awareness and limited access to formal credit. He said, “A majority of first-generation women entrepreneurs, particularly in smaller towns and rural areas, have low financial literacy and are not well informed about various government schemes and their benefits.
There is also little support from traditional commercial banks and local government agencies to educate and assist women entrepreneurs in availing financial subsidies.”
Women entrepreneurs are also often perceived as risky borrowers, largely because they lack adequate collateral or property ownership. In India, a significant proportion of women run micro and small businesses predominantly in the informal sector, which further discourages them from seeking finance through formal institutions.
According to the International Finance Corporation, it takes a man an average of two visits to a bank to get a loan sanctioned, whereas women typically need to make at least four.
Amid these discriminatory barriers, the Reserve Bank of India has cut the repo rate to 5.50%, the lowest since 2022, and reduced the Cash Reserve Ratio by 100 basis points. This policy is aimed at injecting more liquidity into the economy, leaving commercial banks with greater funds to extend as loans to the public. Both banks and women entrepreneurs are in a favourable position, with increased liquidity at their disposal.
The government’s schemes have been launched with a strong intent, but their implementation has often fallen short due to administrative inefficiencies.
The data for the charts were taken from Reserve Bank of India, Press Information Bureau, SIDBI, NITI Aayog, Micro Units Development & Refinance Agency Ltd. (MUDRA)
B Renuka Ramakrishna is interning with The Hindu Data Team
Published – July 09, 2025 07:00 am IST
