Need to invest in women-owned MSMEs to further women-led development in India

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During its G20 Presidency, India made women-led development a key priority. This focus received strong support from member nations and was hailed by global leaders and development partners as a step towards accelerating women's economic empowerment.

India is putting itself at the forefront of this movement. The force behind this important agenda comes from the stated commitment of the Indian government to undertake policy reforms that will support women at all stages of life. The reforms will include:

1) Programs focused on improving the health and nutrition of adolescent girls and young women. 2) Initiatives to improve girl's enrollment in primary, secondary and higher education.
3) Policies that enable growth in job opportunities for women.
4) Improvements to workplace safety.
5) Encouraging women's entrepreneurship in the country through investment in capacity building for working-age women.

Recognising the importance of women's workforce participation

Greater participation of women in the formal economy is key to sustaining higher economic growth. According to a case study by the Women Entrepreneurs Finance Initiative, providing equitable economic opportunity can potentially add $6 trillion to global GDP. McKinsey Global Institute estimates that India could boost its GDP by $0.7 trillion by bringing 68 million more women into the workforce by 2025. The World Bank reports that India could increase annual GDP growth by 1.5 percentage points by getting 50 percent of women into the workforce.

Also Read: Why Indian MSMEs should see the world as their target market

The Government of India has taken initial steps to promote women's economic empowerment through initiatives like Stand-Up India, which provides support for the establishment of greenfield enterprises, and Pradhan Mantri Mudra Yojana (PMMY), which provides financial assistance to micro and small enterprises. The initial success of these schemes is reflected in the fact that approximately 69 percent of the loans have gone to women entrepreneurs under PMMY, and 84 percent of the beneficiaries under Stand-Up India are women. Also, a small savings program exclusively for female investors was introduced as part of India's Union Budget 2023-24. These initiatives are enabling more women to help drive India's economic growth.

Driving money into the hands of women business owners

Women-owned businesses are pivotal in nurturing gender parity in the entrepreneurial landscape. An important study by Kinara Capital's MSME Insights Report 2024 analysed 44,821 micro, small and medium enterprises (MSMEs) across six industrial states of India. It revealed that women-owned MSMEs hired 11 percent more women employees compared to those owned by men. The study highlighted that women-owned MSMEs were better at cost optimisation, income growth, and repayment of business loans than those owned by men. This data-driven evidence strongly supports the fact that the social benefits of economic growth can only be maximised if women business owners are given equal opportunities to compete and succeed.

More Reforms Needed

While India is among the fastest-growing global economies and has the third-largest startup ecosystem, it currently ranks 57th out of 65 nations according to the Mastercard Index of Women Entrepreneurs (MIWE) and 70th among 77 countries on the Female Entrepreneurship Index. According to the World Economic Forum's Global Gender Gap Report 2023, India ranks 135th out of 146 countries in terms of female labour force participation. National surveys peg women's entrepreneurship at just 20 percent of the MSME sector.

Also Read: 6 ways India's MSME sector can be made stronger

The above rankings demonstrate the urgent need for further policy-level actions to enable more women-owned businesses to contribute to India's economic growth.  Policy makers must do more to work with the private sector and civil society to deliver on the powerful vision of Women-Led Development as a model for the rest of the world.

 The author is CEO and Co-Founder of WEConnect International, a global network that connects women-owned businesses to qualified buyers around the world.

The thoughts and opinions shared here are of the author.