CREDITENABLE

Budgeting for Inclusivity: MSMEs and Women Entrepreneurs in the 2024 Economic Landscape

The recent interim budget, unveiled by Finance Minister Nirmala Sitharaman on February 1st, outlines a vision for the country rooted in four pillars: Uplifting the poor, Youth, Women, and Farmers. As we delve into the policies aimed at achieving these goals, an integral fifth pillar emerges—the Micro, Small, and Medium Enterprises (MSMEs). Contributing to over 27% of the country’s GDP, MSMEs play a crucial role in boosting the economy, creating jobs, and driving innovation, serving as a robust backbone to India’s economic structure.

The Role of MSMEs: Driving Economic Resilience and Growth

The Role of MSMEs: Driving Economic Resilience and Growth

Let’s first understand the unsung heroes of economic development – MSMEs. Despite their smaller scale, these enterprises showcase flexibility and adaptability, substantially contributing to job creation, innovation, and regional development.

The recent interim budget, allocating Rs 22,138 Cr to the MSME Ministry, recognizes their vital contribution and reflects a commitment to fostering their sustained and sustainable growth.

Despite the substantial impact of COVID-19, this sector demonstrated resilience, bolstered by initiatives such as the Emergency Credit Line Guarantee Scheme (ECLGS) and the Atmanirbhar Bharat Abhiyan. These measures, offering collateral-free loans and financial support to MSMEs, align with the government’s commitment to fostering self-reliance and economic recovery, standing as a testament that with the right support, MSMEs have the potential to overcome challenges and reach new heights in their endeavours.

The Rise of Women Entrepreneurs: Shaping a Diverse Economic Future

Delving into the MSME landscape reveals a crucial element—the presence of women, constituting 13.76 percent of India’s entrepreneurs.

This growing trend challenges gender norms, with 40 percent of businesses pitched in the second season of the popular TV show, Shark Tank, being owned by women.Women entrepreneurs infuse our economy with unique perspectives, innovative ideas, and dynamic growth, acting as catalysts for diversity and innovation within the entrepreneurial and MSME ecosystem. Beyond being a moral imperative, empowering women entrepreneurs is also a strategic move for India’s economic prosperity. The recent interim budget reflects this momentum with the creation of a Rs 30 Cr fund within the PM MUDRA YOJANA loans specifically for women entrepreneurs.

Aligned with Prime Minister Narendra Modi’s goal of creating 2 crore women entrepreneurs in villages, the Union Finance Minister, also announced the expansion of the Lakhpati Didi Scheme. Emphasizing empowerment and self-reliance achieved by nearly 1 crore women in rural areas through the scheme, Sitharaman proposed an increase in beneficiaries to three crores.

These budgetary measures reflect commitments to empower women entrepreneurs and underscore the essential need for such supportive measures.

Past schemes, like the MUDRA YOJANA, have proven beneficial, with the government disbursing an amount of around 13 lakh crore rupees for 2015-2016, jumping to 45 lakh crore rupees for 2022-2023. This substantial increase underscores the impact of such schemes when brought to the forefront, showing how women entrepreneurs, in particular, can leverage and benefit from them when in need.

Navigating the Financial Landscape: Challenges and Seizing Opportunities

While entrepreneurial spirit is crucial, the intricate path demands more—adequate financial support and education. The current state of the lending landscape for MSMEs and women entrepreneurs presents challenges, highlighting the urgent need for policy and industry changes to support financial education and inclusion. As a woman entrepreneur familiar with the system’s challenges, I’ve witnessed first-hand, the systematic hurdles hindering MSMEs and women entrepreneurs in the lending landscape.

There’s a crucial need to demystify the borrowing process through financial education, enabling entrepreneurs to leverage policies and provisions introduced in the budget. Entrepreneurs take on significant risks when they start their ventures – these risks are magnified for women. In the current lending ecosystem, the human element of entrepreneurship gets lost. With the overwhelming volume of funding requests lenders get, they forget to treat every small business as someone’s dream and their life’s work.

CreditEnable aims to bridge this gap, assisting MSMEs and women entrepreneurs in securing funding through expert guidance and empathetic support.

As a fintech led by a woman entrepreneur, CreditEnable actively engages with entrepreneurs, witnessing the unique challenges faced by women-led businesses. From the need for co-applicants to regulatory red tape and risk categorization, we understand these hurdles. We’re dedicated to creating a lending ecosystem where all entrepreneurs, including women, have access to affordable finance, and the programs introduced in the 2024 interim budget are a welcome step in that direction.

The Interplay with the Budget: A Pivotal Move for Economic Growth & Inclusivity

The recent interim budget underscores the Indian government’s commitment to economic growth and inclusivity. The Rs 22,138 Cr allocation to the MSME Ministry recognizes their pivotal role in the economy, complemented by provisions for the MUDRA scheme and Lakhpati Didi yojna. The startup sector receives a significant enhancement with a Rs.1 trillion fund and a ground breaking option for a 50-year low-interest or interest-free loan, setting the stage for unparalleled growth in Indian startups. Tax reforms take center stage, rationalizing direct and indirect tax rates, easing burdens, and improving compliance. In line with holistic MSME development, the budget emphasizes timely financial assistance and training programs for global competitiveness.

The interim budget thus, serves as a comprehensive framework, not just acknowledging but concretely supporting the crucial roles of MSMEs and women entrepreneurs in fostering growth, innovation, and economic impact.

Challenges in the Lending Landscape: Bridging the Gap for MSMEs and Women Entrepreneurs

Navigating the elaborate lending process presents common challenges for both MSMEs and women entrepreneurs, revolving around financial inclusion and education. In the Indian context, the landscape is marked by a glaring gap in financial education for entrepreneurs, limiting their ability to understand and navigate the intricate financial terrain and make informed financial decisions for their prosperity.

For MSMEs and women entrepreneurs, accessing affordable loans remains a formidable hurdle. Financial institutions, often risk-averse, may hesitate to extend credit, leaving these enterprises grappling for capital. The lack of financial education further compounds the issue, as businesses struggle to meet the stringent requirements imposed by lenders. Facing a cash crunch, many such businesses often resort to utilizing personal savings or borrowing from friends and family to raise capital while others are pushed to more unsavoury and informal channels of funding that are not governed by the RBI, leaving them vulnerable and exposed to financial exploitation.

The FM minister Nirmala Sitharaman, during her budget 2023 speech, announced the establishment of a National Digital Library- to promote financial literacy amongst the youth. She emphasized the importance of financial literacy by urging financial sector regulators and organizations to provide age-appropriate resources and reading materials that will foster this critical skill. Only 27 % of the country’s citizens are financially educated, according to a recent SEBI survey.

This disparity highlights the pressing need for financial education nationwide. Policy measures and industry movements can play a transformative role in addressing these challenges. Initiatives like this, focusing on enhancing financial literacy and fostering a more inclusive lending environment are critical. Government policies that incentivize financial institutions to prioritize MSMEs and women entrepreneurs, coupled with awareness campaigns to promote financial education, can create a more level playing field.

Spotlight on Success: A Female Entrepreneur’s Journey Through the Lending Landscape

At CreditEnable, we’ve been interacting and lending to many women entrepreneurs, and we feel the journey of a woman entrepreneur would help showcase the gap that exists in the industry. The story here is that of Ms. Sarita Sharma, the founder of Digital Solutions. A company that started out during COVID and stands to be 3 years old, today, offering manpower hiring & management, off-boarding, and outsourcing working solutions to companies. Venturing into entrepreneurship for the first time, at the peak of the second wave of Covid-19, Sarita and her husband faced numerous challenges when they set out to build Digital Solutions. The lack of market awareness, savings and investors, no bureau history, and a novel service, made it difficult for them to find the funding to establish their business. So, they began applying for business loans from banks.

Here came the gap, the banks were unable to understand their business model and product. Dejected and rejected by multiple banks, they turned to

CreditEnable to help them get the loan. We were able to bridge the gap by making lenders understand the nuances of their business and have faith in their growth. This challenge is among the many other challenges that CreditEnable addresses, but eventually, we’re looking to build an educated ecosystem where this gap no longer exists – we believe in disseminating information, not gatekeeping. That’s an industry shift we need to endeavour to have. Policies that focus on MSMEs, women entrepreneurs, and lending need to also push the industry to do so.

Conclusion

In conclusion, the 2024 interim budget marks a pivotal move toward economic growth, placing a significant focus on MSMEs and women entrepreneurs. The government’s dedication to financial inclusion, education, and support programs aligns with the objective of fostering a thriving entrepreneurial ecosystem. Navigating the post-COVID economic landscape, the aspects of fostering diversity, innovation, and empowerment become paramount.

The budgetary measures unveiled, recognize the interconnectedness of MSMEs, women entrepreneurs, and overall economic prosperity. Further, addressing information biases in the sector calls for a well-knit and integrated ecosystem.As we look ahead, upcoming policies should promote public-private partnerships to ensure the sector’s comprehensive growth.

Enhancing financial literacy is crucial, highlighting the importance of future policy changes. These changes signal a step towards providing the necessary support and guidance for the continued growth of MSMEs and women entrepreneurs.

Through strategic initiatives and adaptive industry shifts, the interim budget sets the stage for a more inclusive and resilient economy. This echoes the core sentiment of ‘Dream Big. Borrow Smart!’ for every entrepreneur in the country, emphasizing the government’s commitment to creating an environment conducive to entrepreneurial success.

For MSMEs and women entrepreneurs, accessing affordable loans remains a formidable hurdle. Financial institutions, often risk-averse, may hesitate to extend credit, leaving these enterprises grappling for capital. The lack of financial education further compounds the issue, as businesses struggle to meet the stringent requirements imposed by lenders. Facing a cash crunch, many such businesses often resort to utilizing personal savings or borrowing from friends and family to raise capital while others are pushed to more unsavoury and informal channels of funding that are not governed by the RBI, leaving them vulnerable and exposed to financial exploitation.

The FM minister Nirmala Sitharaman, during her budget 2023 speech, announced the establishment of a National Digital Library- to promote financial literacy amongst the youth. She emphasized the importance of financial literacy by urging financial sector regulators and organizations to provide age-appropriate resources and reading materials that will foster this critical skill. Only 27 % of the country’s citizens are financially educated, according to a recent SEBI survey. This disparity highlights the pressing need for financial education nationwide. Policy measures and industry movements can play a transformative role in addressing these challenges. Initiatives like this, focusing on enhancing financial literacy and fostering a more inclusive lending environment are critical. Government policies that incentivize financial institutions to prioritize MSMEs and women entrepreneurs, coupled with awareness campaigns to promote financial education, can create a more level playing field.

About Nadia Sood

Nadia is Founder and Group CEO of CreditEnable, an award-winning Global Credit Insights And Technology Solutions Company that applies proprietary data analytics, deep learning and AI to build solutions to the world’s biggest financial challenges. Nadia is passionate about entrepreneurship and helping SMEs grow.

Prior to setting up CreditEnable and over her more than 20-year career, Nadia had founded and built several successful businesses including Impact Investment Partners LLP, the first FCA authorized Impact Investment Management and Advisory Services Firm in the UK. IIP invests into transformative technology-driven businesses that deliver significant social impact and advises institutional investors on how to deploy their capital for commercial and social return.

Over the course of her career, Nadia has successfully executed and managed complex investments, ranging in size from several million US$ to several billion US$, the largest of which was the establishment of an US$ 8 billion joint venture with Tata Power in India. Nadia has held a number of senior positions including Executive Vice President of SN Power, an emerging markets renewable energy private equity investor,

which she helped grow from US$260 million in AUM to US$1.75 billion in AUM and where she was a Director on the boards of more than 10 companies in India, Nepal and Chile.

Nadia Sood, Founder and Group CEO of CreditEnable.