The total credit gap for MSME's in India is closing. Through digitization, DPIs are making enterprise lendability and formalization possible. Anticipated integrations between UDYAM, TReDS, ONDC, OCEN, and the AA framework will create a real-time ecosystem of enterprise data that is buildable and shareable, as well as several prospects for data-driven underwriting and digital lending in the MSME sector.

But where are the women in all these great movements? When we last checked, they had unmet credit of $158 billion and were $11.4 billion behind men in terms of credit obtained.

Of India's 63 million micro and small enterprises, women hold 55% of them; nonetheless, the bulk are nano businesses. In addition to a number of other issues that contribute to this limitation, Indian women face greater barriers when trying to obtain the credit necessary to expand their businesses. According to certain studies, women microentrepreneurs experience twice as many rejections as their male counterparts.

Fintech companies that develop loan products for small and medium-sized businesses frequently create "gender neutral" products. These items are almost often the result of preliminary study and testing with male consumers. Therefore, even if it's not deliberate, the design, structure, and concept of the product do not represent female consumers.

Building with women requires wisdom and subtlety.

There are distinct digital and financial ecosystems for men and women. Men find it simpler to secure supply chain financing through trade networks, for example, whereas women are more likely to find loan opportunities through social groups, women-led cooperatives, or SHGs. The uptake of digital media is no different. Men are more at ease and self-assured when using digital payment methods and own personal devices. On the other hand, women are less likely to own personal smartphones, particularly in last-mile parts. Common digital settings do not resonate with their distinct mental accounting logics.

The gender gap in MSME financing will not be instantly closed by going digital and pinkifying the user interface! Fintechs can take the following actions to consciously make financing available to female microentrepreneurs:

The majority of women-owned nano- and microbusinesses are either self-funded, financed through unofficial credit, or get working capital from MFI group loans. The latter is helpful in filling regular shortages in liquidity. Research, however, shows that microloans have no effect on the expansion or scaling of businesses. Fintechs can provide the means by which women entrepreneurs in the JLG/SHG pools of today can accumulate data portfolios and produce detailed data profiles that will enable them to advance to more expensive working capital and individual company loans.

Invest in and develop the next wave of female microentrepreneurs focused on growth.

Mentorship and instruction in entrepreneurship are not readily available to women microentrepreneurs. Fintechs might investigate several approaches to cultivate entrepreneurial acumen and discipline within the intended market. Create and make available via physical channels freemium "entrepreneur's toolbox" components. Intentionally create modules and sites of interaction for women. These modules need to have built-in learning curves and incentive systems, as well as natural financial ideas, intrinsic objectives and aspirations, and lived imagery. For example, collaborate with an MFI-NBFC to co-develop a bookkeeping application for women entrepreneurs within their clientele.

Recall that this is a lengthy game. In order for women-led nano and micro enterprises to finally grow to enterprise size and formalization criteria that stably unlock access to institutional funding, you are developing entrepreneurial orientation and capability at the tail end of the market.

Form strategic alliances

Examine and describe the intended market. Which value chains do they belong to? Create embedded finance value chains that are up and down while involving a large number of women. Investigating the Orissan silver jewelry craft value chain? Join forces with white-label retailers and e-commerce platforms. Connect remote workers to online marketplaces. Collaborate with a bank or NBFC to incorporate artisanal credit tied to transaction data into the app.

Once more, consider the context and your intentions. One of the biggest problems facing female microentrepreneurs is access to technology. Access to technology requires risk-taking, bravery, and large upfront investments—none of which are conducive to the normal socioeconomic profile of female microentrepreneurs. Take care of this. Create focused models of technology diffusion that incorporate embedded capital financing. Create tech platforms in collaboration with rural tech entrepreneurs to connect end users with lenders and tech companies.

Lastly, look for opportunities to experiment.

All things considered, female-led nano and micro firms continue to be considered a high-risk lending use case. This isn't because the sector lacks skill or initiative, but rather because it will require more time to properly profile the sector. Fintech facilitators and digital lenders can develop ways to lend to the market while somewhat derisking their own books till that time. Fintech companies engaged in direct lending may want to explore partnering in blended finance for test projects. This will help close the gender gap in MSME credit that currently exists, as well as promote discipline among borrowers and a healthy lending culture. It may even weed out bad apples!

Forward motion

India's female microentrepreneurs face a shortage of resources to help them plan and execute their business ventures. The best option in the short term is enterprise credit. Fintechs have a great chance to lead this industry and innovate in a space that traditional banks and NBFCs lack the resources to benchmark and service at market rates.