Starting a business is no easy feat, especially for women. The odds are often stacked against women entrepreneurs, from access to funding to the gender pay gap. However, the world is changing. Enter Microfinancing. This innovative approach to lending has been making waves in the entrepreneurial world, and for a good reason. According to a paper by Dr. Shuchi Loomba, 44% more women can quickly get loans to start their ventures.
In this blog, we’ll explore the impact microfinancing has on women entrepreneurs and how it’s helping to empower and elevate their businesses.
Microfinancing – A Brief Overview
What is Microfinancing?
It is a way of providing small loans to individuals or groups who cannot access traditional forms of credit. These loans are typically smaller and are given to low-income individuals, small business owners, and those living in developing countries.
How is Microfinancing different from traditional lending?
Traditional lending, like bank loans, usually only goes to people with good credit history and who meet specific requirements. The process can be complex and take a long time.
Microfinancing, on the other hand, is easier to get and available to more people. The loans are smaller and the process to apply is usually faster and less complicated.
Why do women-owned businesses need Microfinancing?
Women entrepreneurs often face barriers when it comes to funding and success.
First, there is the gender pay gap. Women are paid about 20% less than men for the same designation, which presents another hurdle.
Then, lenders can also discriminate against women making it harder for them to get much-needed loans.
Microfinancing can help by making loans and funding more accessible and less discriminatory. It can also provide education and training to help them succeed.
How is Microfinancing changing the game?
According to a study, Almost 90% of India’s 90 million plus microfinance clients are women. Here’s how it’s making a positive impact.
Increased access to capital
It allows access to small loans quickly and easily. This can be a crucial step in starting and growing a business.
It helps women become financially independent and take control of their financial future.
It is also creating jobs, as women entrepreneurs can start and grow their businesses, leading to more employment opportunities for other women.
Credit history building
It allows entrepreneurs to build a credit history, which can help them access larger loans in the future.
Low risk is involved with microfinance, as the loans are given to a group of individuals, thus reducing the chances of default.
It can offer more flexibility than traditional lending, with small loan sizes, tailored repayment terms, and no collateral requirements.
Microfinancing organizations often provide financial education and training to borrowers. It helps them become more financially literate and better equipped to manage their businesses and personal finances.
It also contributes to economic development by providing access to capital for businesses in under-served areas. Hence, more women take a step towards building their future.
The impact of technology on Microfinancing
Technology has played a significant role in breaking down barriers for women entrepreneurs. Through online platforms and mobile apps, women can access microfinancing more easily.
Digital financial tools have also increased access to financial services, such as mobile banking and digital payments. It has enabled greater financial inclusion for women entrepreneurs, providing them with alternative sources of credit.
Tech allows for more transparency and reduces the administrative burden associated with traditional microfinance models. It enables women to start and grow their businesses without navigating the red tape and filing delays.
Microfinancing has made a significant and positive impact on women entrepreneurs. From empowering them to take the first step and breaking down barriers, it’s changing the game. Whether it’s a rice mill or setting up women for the big stage, these microfinance programs have helped numerous women.
With rapid digital technology, we can expect more startups and a good share of women entrepreneurs contributing to the economy.