Financial Inclusion of Women & the Viksit Bharat Goal

Five years ago, Siggireddy Rajyalakshmi from the Anakapalli district (Andhra Pradesh) struggled to meet her basic needs as a tailor. But, her life took a happy turn when she availed a loan through the Pradhan Mantri Formalisation of Micro Food Processing Enterprises Scheme for a catering business and today she runs an eatery named ‘Sri Sai Balaji Chirudanyalu’. She now sends her two daughters to a convent school thereby ensuring their good education. This transformation from a meagre income to owning an enterprise would have been impossible without accessibility to loan, an essential component of financial inclusion. Such instances of financial inclusion have transformed the lives of women like Rajyalakshmi, alongside several other initiatives such as Kudumbshree which have scripted the economic empowerment of women and, in turn, the country. This is why it is essential for India to realize that financial inclusion of women is a huge untapped economic growth potential which is an essential element to eventually attain the goal of ‘Viksit Bharat’ by 2047.

Financial Inclusion of Women and Economic Growth

RBI (2020)  defines financial inclusion as “the process of ensuring access to financial services, timely and adequate credit for vulnerable groups such as weaker sections and low-income groups at an affordable cost”.  Access to credit instruments can play a key role in encouraging women’s participation in the economy through entrepreneurship, especially when entering the formal economy is limited by inhibiting factors including patriarchal mindsets and lack of essential skillsets.  Even the Financial Access Survey (FAS) by IMF (2024), has established that access to financial services helps women enter the labor market, either by fostering entrepreneurship or enabling the transition from unpaid domestic work to paid employment.  Additionally, the economic empowerment of women is not only a need for social justice but an imperative for sustainable economic growth as well. According to a study by the Clinton Global Initiative, women invest 90% of their income into their families as compared to 35% for men. This investment on education, health and nutrition as witnessed in the cases of women like Rajyalakshami has a multiplier effect on the economic growth. 

As a result, financial inclusion can be seen as a catalyst for female entrepreneurship and inclusive growth. According to Economic Survey 2024-25, women own only 22% of India's MSMEs, contributing nearly 30% to the Indian GDP.  Women led MSMEs are more likely to hire other women, thereby reducing gender disparities in the labour market while many of them operate in rural and underserved areas that address pressing local needs while simultaneously bridging the urban-rural divide. In fact it is one of the few sectors where women’s participation is relatively higher and therefore can be critical to women’s labour force participation. However, there are inherent challenges which need to be duly addressed. 

Government Initiatives and Challenges

Acknowledging the crucial role accessibility to financial services for economic growth and gender empowerment, the government of India launched a range of flagship initiatives including Pradhan Mantri Jan Dhan Yojana (PMJY), Pradhan Mantri MUDRA Yojana (PMMY) and Stand Up India (SUPI) which have special provisions for women. The schemes have received an encouraging response with a report in 2023 stating that 69% of the total loan under PMMY and 84% of the total loan under SUPI were availed by women entrepreneurs. Other initiatives like the Self Help Groups and Bank linkage Programme are also duly promoted by the government for microfinance in the rural areas.

While the achievements of the successive government schemes are commendable, the challenges to access to formal credit should not be overlooked. A report by the World Economic Forum (WEF), in 2021 portrayed the grim picture by highlighting that globally women form nearly 55% of the unbanked population and still face challenges in accessing banking services. Again, India is not immune to this trend despite women owned businesses having better loan repayment records.  Also, there are several impediments to access including lack of awareness, paucity of women business correspondents, lack of credit scores & formal business histories and lack of gender disaggregated data for women centric approach. This is further supplemented by socio-cultural biases, for example, financial institutions perceive women led enterprises as riskier and therefore they are unable to access formal loans which eventually results in women resorting to self finance or complete abandonment of the project. 

Recommendations

Addressing the challenges faced by women in accessing financial services requires a multi pronged approach. Firstly, the IMF’s FAS report (2024) advocates for collecting gender-disaggregated data for gender responsive policymaking. Secondly, appointing more women business correspondents could be adopted, in order to make females more comfortable to openly discuss their concerns and seek information. Thirdly, promoting initiatives like the Self-Help Groups’ (SHG) and bank linkage programmes have significantly contributed to their financial inclusion. As a result, such approaches could be further looked into to identify other modes of application. Fourthly, under Corporate Social Responsibility (CSR), companies should be encouraged to provide credit to women enterprises. 

Former IMF Chief Christine Lagarde argued that achieving gender parity in employment could potentially increase Indian GDP by 27%. As India aspires to be ‘Viksit’ by 2047, it simply cannot afford to ignore its 48.44% population and its entrepreneurial acumen. This is an economic imperative which India needs to look into for the sake of its  development aspirations.