Published on All About Finance

Improving women’s access to credit in India

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A female shopkeeper and a customer exchanging Rupees at Goregaon market, India | © A female shopkeeper and a customer exchanging Rupees at Goregaon market, India | ©

Since 2011, India has doubled the share of adults with a financial account to reach 78 percent. As discussed in the new Findex Note: India, this growth has also been equitable, as India’s gender gap has in that same period dropped from 22 percentage points to insignificant levels.

India’s growth in account ownership has been helped by various digital innovations and government sponsored schemes aimed at financial inclusion. The Pradhan Mantri Jan Dhan Yojana (PMJDY program) has proven to be a game-changer, not only for including a higher proportion of the population in formal banking channels, but also for reducing the gender gap in account ownership. Eight years after its implementation, more than 462 million accounts have been opened, 56 percent of which belong to women, and 67 percent of which are in rural and semi-urban areas.

Yet even though the number of women with bank accounts has increased, equity in financial usage has lagged . Credit use in particular by women is low. The Global Findex 2021 data shows that the share of adults in developing countries that borrowed formally in the year prior to the survey was only around 23 percent. For India, that share was ten percentage points lower, at 13 percent. The share of women borrowers in India is lower still at 10 percent, as compared to 15 percent of men.

Other data sources show a systemic gender gap in credit usage. According to a 2020 study, women in India receive credit equivalent to only 27 percent of the deposits they contribute, while men receive credit equal to 52 percent of their deposits. This discrepancy might be due to women not taking advantage of their credit history by applying for loans, and it may be that financial institutions do not grant credit equitably to women.

The reason we need to care about these issues is that credit can have a significant impact on women’s income-generating opportunities. This has been especially evident during the COVID-19 pandemic. According to a 2022 IFC report, approximately 90 percent of women entrepreneurs in India have not borrowed from a formal financial institution. Another study reported that 53 per cent of male business owners lacked cash reserves during the lockdown of 2020, but the figure for female-led businesses was as high as 72 per cent.

Explaining women’s low access to credit and identifying ways to increase it

Low engagement and inactive accounts are possible explanations for women’s low credit adoption in India. Financial institutions often measure risk and assign credit in part based on an applicant’s transaction account history. However, account inactivity is high in India, resulting in fewer women having a meaningful account history with which to measure risk. The Global Findex 2021 finds a 12 percentage-point difference between women account owners who had an inactive account (42 percent) and men account owners who did so (30 percent) . Increasing financial usage overall could be a first step toward improving credit access.

As for how policies and practices can help increase financial usage for women, consider the reasons why people have inactive accounts: the Global Findex 2021 finds that distance from a financial institution; lack of trust in financial institutions; and having no need for an account were the three most commonly-cited reasons. Distance to a branch is a convenience issue, which financial institutions can address with business models that embrace agent banking or mobile technology for account access.

Another possible issue affecting women’s adoption of financial products is gender sensitivity. Anecdotal evidence suggests that women are more likely to use their bank accounts, as well as to save and borrow, if a female banker or agent is available to help them. However, since financial institutions have primarily catered to men and male-owned businesses, they have limited understanding of the socio-cultural constraints and operating contexts that women and women-owned businesses face. As a result, the number of women business correspondent agents in India is low. These are in-person staff for non-branch banking services locations. As of March-2022, less than 10 percent of India’s 1.3 million business correspondents are women, limiting the access options for women borrowers .

A more gender-sensitive approach would call for wider representation of women at all levels. In addition to hiring more women in frontline roles such as business correspondent agents, India would benefit from having more women in senior decision-making positions driving gender-responsive financial products and systems.

A third issue related to women’s access to credit is women’s access to non-financial business services, which improve women’s effectiveness as business owners, making them more ready and able to use credit to grow their businesses. Value-added non-financial services such as business coaching, tax-filing support, and product design can serve to contextualize the needs of women borrowers and put them in a position to improve their credit profile – this serves both the women borrowers and the lenders.

According to a 2020 report by IFC and others, banks around the world are beginning to realize that improving business practices are an essential component of any effective proposition for women-led small and medium enterprises. As the cost of technology drops and the scale of service providers expands in India, financial institutions will need to include non-financial business services more extensively, as part of a comprehensive package for women customers.

Taking the next steps

Giving women borrowers in India the ‘credit’ that they deserve requires a comprehensive ecosystem that promotes convenience, provides gender-appropriate modes of engagement, and considers the broader needs of women’s lives and businesses. This could lead not only to greater credit to women, but also to improved outcomes for society.


Tushar Arora

Senior Financial Sector Specialist, World Bank

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