Start-up like a girl

| | in Oped

Even as funding opportunities are coming up and the business environment is opening up to diversity, it may be a while before women entrepreneurs feel at par with their male counterparts

With the 2018 International Women’s Day motivating the world to #Pressforprogress, gender parity still seems to be a challenge when it comes to obtaining ‘startup capital’ in India. In a study conducted last November on women entrepreneurs at the IITF-India International Trade Fair at New Delhi, it was found that only 18 per cent of the sample reported had obtained external funds for businesses, the rest relied on self-funding or borrowing from family members. Over 86 per cent of the sample felt that women face serious issues in funding their startups.

Entrepreneurs, who hailed from different locations such as Delhi, Bengaluru, Patna, Dehradun, Manipur, Assam and Jammu & Kashmir, managed a variety of business such as clothing, jewelry, crockery, food processing, grocery and home electronics. Around 77 per cent of the women were graduates with experience ranging from two years to over 10 years in their respective trades.

On being asked what discouraged them from obtaining external funds, the business owners cited a variety of reasons: Lack of awareness about funding opportunities, a desire to avoid the burden of interest payment and procedural hassles. Many also reported that they were denied loans on grounds on insufficient experience, absence of collateral and poor proposal statements. Over 20 per cent of them believed that loans are provided only to people with powerful connections. Even those who had applied and obtained external funding from banks or micro-financing bodies, complained of elaborate documentation, slow and complicated process and inability to understand the modus operandi due to lack of financial education.

Low access to loans tend to make women entrepreneurs invest in businesses that require low capital investment and avoid scaling up through big investments and the latest know-how. On a related note, 60 per cent of the sample surveyed reported minimal use of digital technology to handle and promote their business.

Entrepreneurs recommended a variety of reforms such as simplified and expedited process of loan application and disbursement, efforts to build awareness regarding Government schemes for women entrepreneurs through panchayats, post offices and other Government platforms and greater transparency in the funding processes. An ecosystem of women stepping in as investors or mentors for women-led businesses was viewed as particularly important as was the need for a networking site or a single point of reference for funding information for women entrepreneurs, preferably in regional languages. While close to one-third of the women said that the situation has improved considerably from what it was before, personal sources still remain one of the top choices for obtaining capital, chiefly for the low turnaround time.

Concerns raised by the study echoed what has been shown by research on ‘startup sexism’, the systematic victimisation of women entrepreneurs by denying them funding and mentoring opportunities. Perception of women business owners as less serious and competent, and more risk averse than their male counterparts, cause them to be sidelined by investors.  However, the current trends also reveal a vicious cycle, where low probability of getting funding, as well as lack of informational resources, is keeping women entrepreneurs away from applying for assistance, further reducing their presence in the country’s business map.

The 2017 Global Entrepreneurship Index has shown India to make the largest improvement in rankings among all nations — moving from the 98th spot to the 69th position on the list, ranking next to only the US and the UK in terms of the number of startups.  India also witnessed in 2016, the launch of the Startup India Action Plan that has over 50 different schemes for funding, incubating and promoting entrepreneurial ventures, as well as diversity-focused initiatives such as the Stree Shakti Package for women entrepreneurs, Bharatiya Mahila Bank Loan, Dena Shakti scheme and the Annapurna scheme.

However, when it comes to women entrepreneurship, India ranked 49 among 54 countries in a 2017 Mastercard Index of women entrepreneurs in terms of parameters such as support conditions, financial access, knowledge and advancement outcomes. Even with funding opportunities coming up and the business environment opening itself to diversity, it may be a while before women entrepreneurs feel at par with their male counterparts and the solution appears to lie in supplementing the welfare schemes with improvement in accessibility, financial education, mentoring facilities and simplification of processes.

(Bishakha Majumdar and Diksha Jaiswal are associated with FORE School of Management, New Delhi)

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