49% of women-owned micro units wouldn’t be able to survive at all amid sudden revenue loss: Study

• by MSC
• Oct 11, 2024
• 2 min
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The report aims to unpack the concept of financial health specifically in the context of wMBs. It does so by starting to look at the drivers that influence the growth and resilience of wMBs and forms a framework to identify a financially healthy wMB. The report is informed by insights from the ground – women entrepreneurs themselves, Enterprise Support Organizations and Financial Institutions.

61 percent of women-owned micro businesses in India remain unregistered with formalization being a key barrier to the support of such enterprises, said a report on Thursday by global consulting firm MicroSave Consulting (MSC) in collaboration with microfinance association Sa-Dhan and supported by JPMorgan Chase. Moreover, sustainability is another key challenge faced by women micro businesses as nearly half of them (49 percent) said they would not be able to survive at all in case of a sudden loss of revenue.

The research, covering six regions—Delhi-NCR, Gujarat, Maharashtra, Telangana, Karnataka, and Tamil Nadu— collected data through 1,460 computer-assisted personal interviews, key informant interviews with financial institutions and support organizations, and desk research.

The report “Decoding the Financial Health of Women-Owned Micro-Businesses (wMB) in India” highlighted the financial challenges faced by women entrepreneurs.

Autonomy was also revealed to be another critical issue for women micro units as about 44.3 percent of women entrepreneurs said they rely on their spouses or other family members to support their businesses, which reflected a significant dependence on external help.

Further, a majority of these businesses do not generate employment. The report said approximately 55 percent of these businesses do not employ any staff and operate as solo ventures, which limits their contribution to job creation and the broader economy.

Among other key deterrents to the growth of women-owned micro-enterprises highlighted in the report were 60 percent of respondents didn’t maintain any written records for their operations; 51 percent who didn’t maintain the records reported that they struggled to pay EMIs or loan dues, 68 percent had no separate bank account for their business, 69 percent said they have not availed any formal loan, indicating potential barrier to accessing financial services; and over 45 percent said they don’t maintain any emergency funds for business at all.

The study defined women-owned microbusinesses as those with annual revenues between Rs 1.5 lakh and Rs 9 lakh, employing three individuals.

Another study in September this year by Crisil and DBS Bank India which included survey of 400 self-employed women highlighted that bank loans were the preferred choice of only 21 percent of respondents looking to fund their business.

On the other hand, as many as 65 percent of self-employed women said they depend on personal savings or financial assistance from family or friends to finance their business.

To boost credit access for women-owned micro and small enterprises, the government last month had enhanced the loan guarantee coverage under the CGTMSE scheme to 90 percent.

MSME Minister Jitan Ram Manjhi had said that 27 lakh women-owned MSEs are likely to benefit from this initiative.

The article was first published on the Financial Express website on 10th October 2024.