Women-led micro, small, and medium enterprises (MSMEs) play a crucial role in India’s economic growth by creating jobs, driving innovation, and empowering communities. Research from 2024 suggests that women-led MSMEs in the manufacturing sector created 63 percent of new jobs. Despite their potential, these enterprises face systemic barriers that limit their growth and sustainability. Addressing these challenges requires collaborative action across stakeholders, including policymakers, financial institutions, philanthropic funders, nonprofits, and other organisations that work to strengthen entrepreneurship in India.
Women-led MSMEs in India are witnessing significant improvements, marking a pivotal shift in their journey toward economic empowerment and inclusivity. Over the past decade, targeted policy interventions such as the Udhayam Shakti Portal, technological advancements such as Unified Payments Interface (UPI), and the growing recognition of gender-responsive financing have created opportunities for these enterprises to overcome long-standing barriers. Additionally, enhanced access to finance, increased participation in digital ecosystems, and climate resilience solutions are transforming the landscape for women entrepreneurs.
While challenges such as societal biases, skill gaps, and limited access to markets persist, collaborative efforts among policymakers, financial institutions, and private sector players are driving change. Success stories of women-led MSMEs breaking into new markets, leveraging digital platforms, and contributing to climate-smart solutions highlight the immense potential of these enterprises to drive economic growth and social progress.
As India seeks to unlock the full capacity of its entrepreneurial ecosystem, the strides made by women-led MSMEs signal a promising future—one of inclusive and equitable development.
However, to reach even greater heights, some persisting problems must be resolved.
The challenges faced by women-led MSMEs
1. Access to finance and markets: As per the International Finance Corporation, women-led MSMEs in India face a credit gap estimated at USD 158 billion. Despite schemes like MUDRA, which disbursed more than INR 15,253 crore in FY 2022, women entrepreneurs often report challenges in accessing loans due to collateral requirements and high-interest rates.
2. Digital divide: A report by NASSCOM revealed limited adoption of digital record-keeping and e-commerce, with only 17.6 percent women using digital methods for customer relationship management. This highlights a significant gap in digital integration.
3. Business development services: According to a study by the Indian Ministry of Micro, Small, and Medium Enterprises, only 14 percent of women entrepreneurs in India have access to formal training and mentorship programmes. This lack of support hinders their ability to scale and access new markets.
4. Socio-cultural barriers: Traditional gender roles significantly impact women entrepreneurs. Women-led MSMEs constitute less than 20 percent of total MSMEs in India, with many restricted to informal or home-based businesses due to mobility constraints and societal norms.
5. Climate risks: Women-led MSMEs are largely in sectors like agriculture and textiles, which are disproportionately affected by climate change. Despite such disruptions, only a fraction have access to climate adaptation financing.
Transforming systems to empower women entrepreneurs
Addressing the challenges faced by women-led MSMEs in India requires an ecosystem-based approach that acknowledges the complexity of barriers these enterprises face. No single funder or stakeholder can effectively resolve issues such as access to finance, climate adaptation, and digital inclusion in isolation. A collaborative approach is vital, bringing together funders, policymakers, nonprofits, entrepreneurs, and other stakeholders to create an enabling environment for these businesses to thrive. Capital allocators across the spectrum must come together to:
1. Recognise the need to change systems
To realise the full promise of women-led MSMEs, we must address systemic inequities within financial systems and markets rather than expecting women to adapt to flawed structures. This involves engendering inclusivity within financial systems—not just directing slightly more funding towards women, but redesigning these systems to prioritise accessibility and equity. Such systemic changes include reassessing collateral requirements, offering non-traditional credit assessments, and creating women-centred banking products that reflect their realities.
2. Make bold and intentional bets
Innovative financing mechanisms like blended finance are emerging as critical tools for tackling current challenges. By combining public, private, and philanthropic capital, blended finance can de-risk investments, attract private sector funding, and channel resources into high-impact areas. For example, concessional funding from philanthropic or public sources can be used to mitigate risks associated with lending to women entrepreneurs, while private investors bring scale. Policymakers play a key role in creating regulatory frameworks that incentivise such models and remove systemic barriers.
In addition to supporting women-led MSMEs, capital providers can mitigate the social and systemic challenges by supporting pressing issues such as lack of care services, financing for reproductive rights and health, reducing gender-based violence, and increasing access to property and leadership roles for women. For example, targeted investments in affordable childcare infrastructure can enable more women to take on the mantle of entrepreneurship.
3. Invest in building resilient institutions
Strengthening the institutions that support women-led MSMEs is essential to safeguarding progress. This involves investing in capacity-building organisations, mentorship networks, and advocacy platforms that promote women’s economic participation. It also requires creating robust mechanisms to withstand backlash against gender equity initiatives. For instance, fostering partnerships between public, private, and nonprofit sectors can ensure that gains in women’s empowerment are institutionalised and sustained over the long term. Here, platforms that facilitate collaboration between stakeholders across sectors can propel research and advocacy and mobilise capital towards relevant solutions. Such platforms are key to laying the foundation for a support system that leverages the expertise of various organisations to fuel the progress of women-led MSMEs.
Ecosystem builders have an important role to play in supporting women-led MSMEs through both traditional methods or innovative financing, providing the necessary technical assistance, capacity building, and market linkages. For example, Mann Deshi Foundation operates a rural bank, business schools, a chamber of commerce, and a community radio station—all designed to provide women-led MSMEs with financial independence, knowledge, and visibility.
Together, these efforts can drive transformative change, ensuring that women-led MSMEs are equipped to access financing, adopt digital technologies, and build resilience against climate change, ultimately fostering inclusive and sustainable economic growth.
Addressing the challenges faced by women-led MSMEs in India is critical for achieving inclusive and sustainable economic growth. By promoting collaboration among stakeholders and adopting targeted strategies, we can unlock the full potential of these enterprises, empowering women entrepreneurs and transforming communities.
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Know more
- Read this report on strengthening and scaling gender diverse MSMEs.
- Read this article about the need for adopting a gender-intentional lens in lending.
