For decades, women entrepreneurs, particularly those running micro and small enterprises, remained underserved by formal banking channels. Rigid collateral norms, documentation-heavy processes, and standardised credit models failed to account for informal income patterns and asset ownership gaps that disproportionately affect women. NBFCs, by contrast, have emerged as critical enablers, bridging this structural credit gap and accelerating women’s participation in India’s MSME economy.

A measurable rise in women business borrowers

Recent data confirms that this change is not anecdotal. A joint study by NITI Aayog, TransUnion CIBIL, and MicroSave Consulting shows that the number of women borrowers in India grew at a 22% compound annual growth rate between 2019 and 2024. Notably, this growth has been geographically broad-based: nearly 60% of women borrowers now come from semi-urban and rural areas, signalling a deepening of financial access beyond metros.

Crucially, women’s borrowing is no longer limited to consumption or household needs. During the same period, women opened around 37 lakh new loan accounts for business purposes, spanning MSME loans, commercial vehicle financing, and loans against property. These loans accounted for disbursements of nearly ₹1.9 lakh crore.

While business loans still represent a modest share of roughly 3% of total loans availed by women, what is significant is the direction of change. It reflects a gradual transition from informal, subsistence-led economic activity to enterprise creation with growth intent.

The microfinance sector reinforces this trend. As of 2024, India’s microfinance portfolio stood at approximately ₹4.4 lakh crore, with women accounting for nearly 99% of the 8.6 crore active borrowers. NBFC-MFIs continue to dominate this space, underscoring their role as the first formal point of credit for millions of women.

Why NBFCs are structurally better aligned to women-led enterprises

The comparative strength of NBFCs lies in their operational flexibility and contextual risk assessment. Unlike banks, which rely heavily on formal income documentation and asset-backed lending, NBFCs have built underwriting models suited to India’s informal and semi-formal economy.

A large proportion of women-led enterprises operate at the micro level. These include tailoring units, Kirana stores, food processing, handicrafts, small-scale trading, and services. These businesses often exhibit irregular cash flows, seasonal demand, and limited documentation, making them misfits for traditional credit frameworks.

NBFCs address this gap through:

• Alternative credit assessment using cash flows, transaction behaviour, and repayment history
• Smaller ticket-size loans aligned with business realities
• Faster disbursement cycles
• Flexible repayment schedules that accommodate income variability

Importantly, a significant share of NBFC borrowers are “new-to-credit” customers. Yet studies indicate that this segment of particularly women borrowers demonstrates strong repayment discipline, challenging long-held assumptions about risk in informal lending.

This has led to a growing institutional confidence in women borrowers, with many NBFCs reporting lower delinquency rates in women-led micro and small business portfolios. As a result, women are increasingly being treated as primary borrowers rather than risk mitigators through joint or group lending structures.

Credit as a catalyst for enterprise growth

Access to formal credit has tangible effects on enterprise outcomes. For many women entrepreneurs, NBFC financing marks the shift from survival-oriented activity to scalable business operations.

Small tailoring units invest in equipment and inventory, food entrepreneurs expand production capacity, and local retailers diversify product offerings. These investments improve margins, stabilise income and, in many cases, create employment within local communities.

Beyond direct economic gains, credit access strengthens women’s financial agency. Formal borrowing reduces dependence on informal lenders or family networks and enables women to build independent credit histories, which is a critical step toward long-term financial inclusion.

Research also suggests that women-led enterprises, once financed, demonstrate higher levels of process innovation, improving product quality, customer engagement, and operational efficiency. These incremental innovations collectively enhance enterprise resilience and competitiveness.

Why women-led MSMEs matter to India’s growth agenda

Strengthening women-led MSMEs is not merely a gender inclusion objective; it is a macroeconomic imperative. Women entrepreneurs contribute to job creation, local economic diversification and regional balance, particularly outside metropolitan centres.

Global and domestic studies consistently show that increased female participation in entrepreneurship and the workforce has a multiplier effect on GDP growth. In India’s context, where a large share of women’s economic activity remains informal, the potential gains from formalisation and credit access are substantial.

NBFCs, with their reach, adaptability and proximity to grassroots enterprises, are uniquely positioned to drive this transformation.

Conclusion

The rise of women-led MSMEs represents one of the most promising undercurrents in India’s economic story. NBFCs have played a decisive role in enabling this shift, recognising potential where traditional systems saw risk, and designing finance around lived realities.

As more women move from borrowers to builders, the impact extends beyond individual enterprises to families, communities, and local economies. If India’s growth is to be broad-based and resilient, women entrepreneurs must be integral to its future, and NBFCs will remain among their most important financial partners.

(Abhinav Agarwal, a qualified Chartered Accountant with 20+ years of diversified experience, has worked across multiple facets of the financial ecosystem, including retail banking, securities markets, and large-scale franchise operations.)