’Low financial literacy, informal borrowing’ Fempreneurs face age-old challenges. How fintechs are lending help?

Every business owner face hiccups while launching or maintaining a company, but women entrepreneurs  or fempreneurs still face age-old challenges like unawareness about government financial schemes, dependency on family credits, informal borrowing, lack of digital literacy, and others during their journey to become job-creators. 

About 52% women entrepreneurs have access to financial credit, but 47% females are struggling with various challenges, according to latest data shared by fintech company Tide as quoted by Economic Times. It also revealed that around 95% of women are not familiar with the existing government initiatives to leverage their business that shifted them towards informal sector for credits.

Besides these factors, women also have less decision-making power, low risk aversion, and fewer financial facilities as compared to men, said Appalla Saikiran, founder and CEO of SCOPE. 

“These difficulties can be made worse if women are living under specific cultural ideas which discourage entrepreneurship or self-reliance, financially narrowing down more on their possibilities of acquiring credits," he told LiveMint. 

Kunal Varma, Freo CEO and cofounder suggested that better financial literacy among women, more gender-sensitive banking practices, and representing females as decision-makers and business correspondents can enhance accessibility of financial credit to women. 

“Women must know how to negotiate the financial system and the benefits of formal credit. Delivering training on financial management, business planning, ethical borrowing, encouraging them to join microfinance organisations and self-help groups can be beneficial,” Saikiran asserted.

In addition, Easiloan CEO Pramod Kathuria also believes that initiatives like government schemes aimed at promoting financial literacy, and empowering women with skills to take financial decisions can strengthen their access to credit and promote their overall well-being. 

The Tide data also highlighted that family is the biggest driver or support for approximately 78% aspiring women entrepreneurs. Even for structured mentoring, about 90% of business women have called close friends, family members or relatives “peers” that indicated need for “know-how” structures for them. 

Experts do not recommend informal borrowing to women entrepreneurs for running a venture as the process incorporates many disadvantages like higher interest rate, lack legal protection, no defined regulations, disputes over repayment, etc. 

“There is no legal safety, no documentation, and no defined regulations. Unfair loan terms, exorbitant interest rates, and disputes over repayment may result from this, endangering women's financial stability and professional prospects,” the SCOPE founder said, while advocating for formal loans, official financial system, and other resources that promote their equitable success in the corporate sector.

Varma added enhancing formal borrowing channels, improving financial literacy, and fostering inclusive banking policies are crucial for supporting sustainable entrepreneurship among women​.

However, the industry experts stated that Indian fintech startups are revolutionising the landscape for female entrepreneurs by dismantling the conventional barriers with the help of advanced technology. 

Saikiran said the digital lending platforms are streamlining the loan application process, evaluating creditworthiness using algorithms and alternative data, and providing financial education to women. 

On the other hand, Freo cofounder said fintech are providing innovative financing solutions that do not rely heavily on collateral, use digital platforms for easier access, and employ alternative data for credit scoring. 

“We provide preferential interest rates on credit lines to women, mirroring the special home loan rates available to them. These initiatives are designed to encourage more women to start and scale their businesses by making financial services more accessible and tailored to their needs,” he added.