Maintaining the Focus on Women in Individual Lending: Insights from India

July 4, 2016

Loans can be a powerful tool to help women entrepreneurs grow their small businesses, but many women business owners still lack access to capital. According to the SME Finance Forum, around 50% of all women-owned micro, small, and medium enterprises (MSMEs) in developing economies are unserved or underserved by the formal financial sector. The credit gap in India is no exception to this trend, which led Women’s World Banking to partner with Ujjivan Financial Services, Pvt. Ltd., with support from The MetLife Foundation, to develop an individual lending program to better serve the country’s entrepreneurs. While Ujjivan has been lending to low-income women for many years through its group loan program, individual lending allows Ujjivan to offer larger and more customized loans that can better support entrepreneur clients’ needs as their businesses grow.

I joined the Women’s World Banking credit team this past April for an assessment of our pilot project with Ujjivan. Overall, the numbers look good: the project has succeeded in improving the productivity of the individual lending program and in shifting its focus toward new client acquisition (rather than conversion of existing group loan clients). However, as Ujjivan moves to serve this new segment of clients, the organization has seen a drop in the percent of women served, from over 99% of Ujjivan’s total client base to around 91% among individual loan clients. Such a decrease is to be expected, and of course, 91% is still quite high, but it is a significant variation from the institution’s norm.

How can Ujjivan maintain its strong focus on women while expanding to new market segments with the individual loan product?

From what I observed during the trip, part of the solution lies in reorienting perceptions of the typical profile of individual loan clients to include economic sectors where women are found. Of the approximately 30 businesses to which we accompanied branch staff over the course of the week, only one was owned by a woman. This is not to say that women-led businesses do not exist in India – far from it. But cultural attitudes in some regions around women’s roles outside the home result in their lesser participation in the types of business activities most commonly associated with need for individual loans. The often “invisible” nature of women’s economic contributions is not unique to India. Women’s World Banking has seen similar challenges in our work developing individual loans for rural women in Peru, Paraguay, and Colombia – click here to read or watch more about those projects.

While Indian women are less often found running the trading-heavy shops that comprise the most prominent segment of commercial market areas, research shows that they still make significant contributions to the economy. Women are particularly active in the informal sector: a 2014 report by Goldman Sachs, “Giving Credit Where it is Due,” estimates that women in India own 50 times more informal businesses than formal. To maintain the strong focus on women in the individual lending model, Ujjivan will need to train loan officers to recognize the potential differences in business profiles and seek out women-owned enterprises. By re-emphasizing women as a priority underserved segment and empowering branch staff with the tools to find and reach them, Ujjivan can ensure its individual lending program serves women just as consistently as does group lending.

Customer research with Ujjivan's clients

Serving as allies for gender equality

At the one woman-owned business we visited during the pilot assessment, the interaction between the client, her husband, and the loan officer highlighted another way Ujjivan can support women entrepreneurs. This client’s “fancy shop” bangles, jewelry, an assortment of cosmetics, and other small items. She manages the store while her husband works full-time as a driver. Despite the husband’s minor role in the shop, it was he who answered the majority of the loan officer’s questions, often talking over his wife and only deferring to her in instances when it became clear he did not know the required information. When given space to speak, the woman client responded more naturally and provided more nuanced and complete data, informed by her daily operation of the business.

As we were leaving the shop at the end of the visit, I asked the woman why she had allowed her husband to answer on her behalf, though it was her business. She shrugged her shoulders and said: “What can I do? He likes to talk.”

I see a clear opportunity for a woman to be more assertive in the workplace – a challenge that even C-suite women in New York board rooms still face. But I also see an opportunity for the loan officer to be a better ally for his client, through such simple tactics as insisting that she—as the business manager and Ujjivan client—be the one to answer questions about the business. Such actions could have impact well beyond one client: as a representative of a respected financial institution, the loan officer has credibility in the community and thus has the potential to be a powerful advocate for gender equality. Gender sensitivity training, such as those recommended in our rural lending for women publication, could make branch staff more aware of strategies for promoting gender equality in situations like this one, and enable Ujjivan to multiply its impact on women’s empowerment.

Maintaining the focus on women

Ujjivan remains committed to serving low-income women, even as the organization expands its credit offerings to reach new market segments. Finding and reaching women clients in these larger business segments is more challenging than at the group loan level, but data shows that there remains a tremendous need among women business owners for capital to support their growing enterprises. As the Ujjivan individual lending program evolves past the pilot stage, the organization will need to further adapt its methods to meet the needs of women entrepreneurs and address common barriers in their access to credit. Our team is looking forward to continuing our collaboration with Ujjivan to demonstrate the strong business case for serving women-owned MSMEs.


Can’t get enough on individual lending? Check out our recent publication, “Individual Lending for Low-Income Women Entrepreneurs: An Inclusive Approach.”