Giving a Boost to Rural Women Entrepreneurs

Subitha Banu, fondly known as Bhai Amma, arrives like clockwork at 10 am at her small roadside stall in Erode, in India’s southern state of Tamil Nadu, bearing two large vats of biryani. On a good day, she sells out her stock by noon and goes on to cook a spicy mutton or chicken curry for the men who frequent the wine shop next to her. At night, she returns with a stock of eggs, to whip up omelets for the evening clientele. By 8.30pm, when she has made a profit of INR 700-800, she returns home with her son, to begin anew the next day. This savvy entrepreneur would now like to double her earnings by expanding her little stall, employing more people, and increasing her offerings. But for this she will need an investment of about INR 1,00,000.

Usually, in such scenarios, rural women turn to their local self-help-group (SHG) to meet their credit needs, as loans from formal financial institutions for aspiring women entrepreneurs are not easy to come by.  However, Bhai Amma may have met a ceiling, as the amount is too large for her SHG to sign off on.

Recognizing the importance of women entrepreneurs in catalyzing change and boosting growth, the government of India has, since 2018, launched a series of programs to support them. However, most policy initiatives focus on encouraging first-generation women entrepreneurs to establish their businesses or on enabling Micro, Small and Medium Enterprises (MSMEs) - that are classified as having an annual turnover above INR 50 million - to scale up.

Ventures like Bhai Amma’s that generate annual revenues between INR 300,000 and INR 3 million fall between these two categories. This niche segment – categorized as ‘Growth-Oriented Woman’s Enterprises’ (GOWE) – has the potential to scale up and grow and create more jobs – but is missing from the mainstream classification of enterprises and remains largely understudied.

Sonali Jhade, from Wardha district in Maharashtra, used to supplement to her earnings as an agricultural laborer by making flower garlands for a shopkeeper during the lean season. Having acquired the necessary skill, she branched out on her own with the help of a small loan of Rs 5,000. She now wants to start her own garland shop. But to be successful, she will need access to formal credit, in addition to sound business and marketing advice.

How can women-led enterprises grow?

To identify interventions that would help such enterprises grow to their full potential, the World Bank carried out a study in six Indian states. The study characterized GOWEs as having a much smaller scale of operations than traditional MSMEs. They must also have at least one employee and record annual sales of INR 240,000 or more, and have grown over the past three years by offering new products or services, expanding their customer base, or introducing technological innovations. (WER)

The study showed that more than 85 percent of such women-owned, rural, non-farm enterprises are concentrated in five subsectors: retail trade, manufacturing of apparel, food products, food and beverage services and the handloom sector.

Importantly, the study highlighted the huge untapped opportunity that GOWEs represent for India to create jobs, especially in the rural areas.

This is of particular significance for India as nearly 27 million women have moved out of farming over the past decade alone. Of these, only five million have joined the non-farm sector while the rest have withdrawn from the labor force altogether (Chand, Srivastava, and Singh, 2017).

Targeted policies for broader support

While GOWEs such as Bhai Amma’s are slowly gaining recognition as a specific enterprise class in India and beyond, the need of the hour is to empower them with systematic and comprehensive support structures to enable them to meet their tremendous potential. This will require policies that are tailored to their specific needs, along with access to formal, adequate, and customized finance. In addition, these enterprises will need advisory, mentoring and networking support.

These measures will not only help India increase its rate of female labor force participation – from 37 percent – but will also enable the country to address the gender gap in women’s entrepreneurship, where India ranks 70th among 77 countries.

The study forms part of the World Bank’s broader support to India for promoting rural women’s entrepreneurship. This includes support for national and state-level programs that incubate women-owned enterprises with demonstrated growth potential, assist them in developing business plans, and connect them with commercial banks for fixed and working capital loans.