Financial Inclusion: Need to Bridge Gender Gap in MSME Sector, Says RBI’s Swaminathan

Reserve Bank of India (RBI) Deputy Governor Swaminathan J has emphasized the need to bridge the gender gap in the MSME sector to enhance financial inclusion and ensure that banking services reach the remotest areas of the country. Speaking at the conference Ensuring Last Mile Connectivity of Banking Service on Wednesday in Hubballi, Karnataka, Swaminathan highlighted that increasing female participation in the MSME sector is critical for India to leverage its demographic dividend.

Swaminathan pointed out that MSMEs play a crucial role in the economy, and improving the female labour participation rate within the sector would drive economic inclusivity and growth. “Studies show that businesses with at least one female founder often foster more inclusive work environments, employ a higher percentage of women, and generate more revenue,” he remarked.

However, women-owned MSMEs currently account for less than 20% of the total, facing significant challenges such as limited access to funding, societal barriers, and difficulties in obtaining affordable finance. To address this, Swaminathan proposed targeted interventions at the district level. He advocated for government-sponsored programs and tailored banking schemes to support women-led enterprises, alongside efforts to raise awareness among potential female entrepreneurs about available opportunities.

Swaminathan also acknowledged that while credit delivery to priority sectors has improved, significant challenges remain, particularly for MSMEs. He highlighted that half of Self-Help Groups (SHGs) are not yet linked to formal credit systems, and many small and marginal farmers still lack access to bank financing. Addressing these gaps will require incorporating the credit needs of these segments into district and block-level credit plans, he added.

This concern over access to formal finance aligns with an earlier statement by RBI Deputy Governor Michael Debabrata Patra, who noted at a recent CII event that while the overall MSME finance demand in India is around $1,955 billion, only $289 billion of this demand is currently met by formal lenders.

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