Are Borrowers In India Looking At Women Lenders More Favourably In 2024?

Has there been a gradual change in how financial institutions in India are looking at borrowers?

What group is being deemed to be a safe bet, when it comes to loan repayment? It seems to be women. 

It’s said that the gross NPA (Non-Performing Asset) ratio for loans defaulted by women stood at 1.9% in FY2023, compared to 2.5% for men in the same period. It might not seem like much percentage-wise, but this is being seen as significant, while indicating some improvement over the previous fiscal, where the women’s default rate was 2.1% and men’s default rate was 2.5%. But, that might also mean that if there were 100 women lenders and 100 men lenders, in FY2023, around 98 women and 97 men didn’t default. That doesn’t sound too bad or too big a comparison, but it might change keeping in mind how many actual lenders are there.

The statistics, also, seem to align with the rise in women’s borrowing activity. One report outlines that the growth in women borrowers with active loans outpaced that of men in 2023. Women borrowers were said to have increased by close to 20% in that year, compared to close to 15% for their male counterparts. Even the average loan size for women is said to have seen a consistent uptick across major retail loan categories. Plus, around 55% of Jan-Dhan account holders are women.

So, does all this mean that women might be demonstrating just a tiny bit more repayment discipline with their borrowing seeing a steady rise? So, maybe, lenders might be likely to intensify their focus on wooing women borrowers a bit more. Could this be seen as a win-win: women getting access to capital for their business or for personal growth, while lenders benefit from lower credit risk?

Two interesting groups might be providing structured avenues for women to access credit: SHGs (Self-Help Groups) and JLGs (Joint Liability Groups). SHGs are said to have saved money before applying for a loan, while JLGs might not have to. In either case, it might seem like loans disbursed under these frameworks are being repaid on time. So, lenders might see them as a reliable segment.

Unfortunately, it’s still not total puppies and sunshine. There are still barriers women might face, when it comes to financial inclusion. In FY2022, female labour force participation aged 15 and above in India was roughly 30%, compared to close to 80% in men. The Reserve Bank’s ED Neeraj Nigam was said to have remarked that women constitute only 7% of the outstanding credit to MSMEs, while roughly 20% of MSMEs are said to be women-led.

So, for VCs or banks, there might be a bottom-line opportunity in terms of capital loss, because it just might indicate that to some degree, women entrepreneurs could be more reliable in repayment terms. It’s said that women reinvest 90% of their income back into their families, while men reinvest up to 40%. If that statistic is accurate and relevant to 2024, whoa.

So, does this mean women entrepreneurs might be a bit more likely to repay the trust you place in them? With interest?