Empowering India’s Women-Led Startups: Overcoming The Gender Funding Gap.
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Indian women-led startups continue to face significant challenges in overcoming the gender funding gap. Aditi Bhutia Madan, a successful businesswoman and former MasterChef India contestant, experienced firsthand the obstacles that hindered her access to formal financing for her startup, Yangkiez By MomoMami.
For years, Madan struggled with loan sharks demanding exorbitant interest rates or ownership stakes in her business. These challenges were compounded by the additional barriers faced as a woman entrepreneur in India. However, Madan’s journey took a positive turn when she joined the Women StartUp Programme (WSP) at NSRCEL, a renowned business incubator at the Indian Institute of Management Bangalore.
Through the WSP, Madan received training in crucial business skills, including the art of pitching for financing. Equipped with newfound knowledge and confidence, she presented her business on the reality show Shark Tank India and secured 7.5 million Indian rupees ($91,000) from investors. This investment enabled her to enhance capacity and infrastructure at her company’s production units.
India currently ranks 57th out of 65 countries on the MasterCard Index of Women Entrepreneurs, reflecting the existing challenges faced by women in business. Government data shows that only one in five businesses in India is led by women. Access to capital remains a significant barrier, with women entrepreneurs facing an unmet credit gap of over $11.4 billion. Furthermore, female entrepreneurs receive a mere 5.2% of the outstanding credit granted to enterprises by Indian public sector banks, as highlighted by the International Finance Corporation (IFC).
The financing gap primarily stems from gender discrimination and conservative societal attitudes prevalent in a country with a population of 1.3 billion. Many women entrepreneurs rely on self-financing or support from family, both of which present challenges. In fact, a Bain & Company and Google survey found that 43% of women entrepreneurs reported a lack of support from their families and spouses.
Sucharita Eashwar, the founder of Catalyst for Women Entrepreneurship, emphasizes that family support and finance are often the initial hurdles faced by women entrepreneurs. Changing these attitudes is crucial. Investors must adopt a neutral stance regarding gender during pitching meetings, focusing solely on the merits of the business. Gender, age, and marital status should not be determining factors in funding decisions.
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Research conducted in the United States highlights the biases faced by women entrepreneurs. Investors tend to ask men “promotion” questions, which focus on ambitions and achievements, resulting in positive responses and increased funding. On the other hand, women are more frequently asked “prevention” questions that revolve around safety, losses, and risks. This dynamic hinders women’s ability to secure capital, as demonstrated by a study published in the Academy of Management Journal.
To address the funding imbalance, entrepreneur-turned-investor Anisha Singh established the She Capital fund, aiming to support women business founders. Despite the proven potential of women-led startups to generate revenue and create jobs, banks remain hesitant to fund female entrepreneurs due to concerns about their success. Nonprofits such as Dhriiti and BYST have conducted surveys that reveal the challenges women entrepreneurs face when availing loan services from public sector banks.
While the Indian government has introduced financial support schemes for female-led enterprises, the number of women entrepreneurs benefiting from them remains low. Access to professional communities and networks is also limited for women entrepreneurs, resulting in information gaps regarding funding sources and market insights.
Programs like the WSP provide a women-focused community that counters the male-dominated world of business. By offering support, training, and networking opportunities, these initiatives aim to address the isolation and lack of resources experienced by female founders.
To bridge the gender funding gap for women-led startups in India, it is crucial to challenge societal biases, promote gender-neutral evaluation processes, and provide targeted financial support and resources. Creating a more inclusive and supportive ecosystem will empower women entrepreneurs to overcome barriers and thrive in the business landscape.