Amid a significant surge in women seeking credit, another crucial trend emerging in India is that 60% of women borrowers hail from semi-urban or rural areas. According to the latest report by TransUnion CIBIL and NITI Aayog, the financial ecosystem is witnessing a transformation, with retail loans demand from women borrowers tripling between 2019 and 2024—a compounded annual growth rate of 22% over the last five years. The fact that the majority of borrowers are from rural and semi-urban regions reveal both the empowerment of women and the broader economic development occurring beyond metropolitan areas.
The report, From Borrowers to Builders: Women’s Role in India’s Financial Growth Story, reveals that semi-urban and rural women are the dominant borrowers in agriculture (84%), business loans (65%), and gold loans (70%). This surge signifies not only a shift in individual financial agency but also a deepening of the formal credit ecosystem and an expansion of financial inclusion in India.
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For generations, Indian women have been burdened with unpaid domestic work and childcare responsibilities, limiting their participation in economic activities. The increasing access to financial resources among rural and semi-urban women represents a significant breakthrough. It translates into improved livelihoods, dismantling of traditional barriers, and enhanced economic participation. Recognising this, UN Women has placed special emphasis on uplifting this demographic as part of the Millennium Development Goals.
Benefits of financial inclusion of women
When women earn, their household income rises, directly improving living standards. Studies suggest that increased female workforce participation significantly boosts regional GDP, with benefits extending beyond individual homes to national economic growth. Furthermore, financially independent women are more likely to invest in their children’s education, thereby breaking intergenerational cycles of poverty.
While urban centres are often viewed as the primary drivers of economic change, reports like these challenge that perception, highlighting that rural and semi-urban women are key participants in India’s evolving credit landscape.
Regional variations
The report also highlights significant regional disparities. Southern states such as Tamil Nadu (44%), Andhra Pradesh (41%), and Karnataka (34%) lead in women’s credit participation, while northern and central states, despite experiencing high growth rates, lag in their overall share.
Women are utilising credit to fulfil diverse aspirations, from funding small businesses and agricultural ventures to investing in education and healthcare. However, an interesting trend emerges among younger women: those under 30 account for only 27% of retail credit uptake, compared to 40% for men in the same age group. Encouragingly, the number of women opening business loan accounts has grown fourfold over the past six years.
Women’s entrepreneurship in India is undergoing a notable transformation. Since 2019, there has been a 14% increase in the share of business loan originations by women, who now constitute 35% of all business borrowers as of December 2024.
Challenges to financial empowerment
Despite this positive momentum, structural challenges remain. Nearly 30% of women-led individual enterprises and 22.2% of collective enterprises are not credit-ready, even for small loans. Although 17% of women in the 90+ days-past-due category improved their credit status within six months of self-monitoring, systemic barriers still hinder their access to credit.
One of the most persistent hurdles is the reluctance among women to seek credit due to negative banking experiences. Many banks require collateral, which poses a challenge for 79% of self-financed women-owned businesses. Unlike their male counterparts, women often have limited access to assets and property, making it difficult to secure loans.
Additionally, gender biases and cumbersome application processes deter applicants, with some banks rejecting loan applications despite strong financial records due to a guarantor requirement. To address this, financial institutions need to assess borrowers based on their potential rather than rigid paperwork. Fintech solutions also hold promise in enabling bias-free digital lending for women-led enterprises.
Rural women, in particular, face additional obstacles such as limited financial literacy and entrenched social biases, further compounding the challenge of accessing credit.
Role of credit in shaping economic participation
India has one of the lowest female labour force participation rates globally, but expanding credit access may be a game-changer. As more women enter the workforce or embark on entrepreneurial ventures, access to formal loans provides a crucial pathway for career advancement and business growth.
One potential solution to boost financial inclusion for women is to strengthen the role of self-help groups (SHGs). In India, SHGs have been instrumental in promoting financial inclusion through the SHG-Bank Linkage Programme. Furthermore, women tend to feel more comfortable interacting with female business correspondents, who they perceive as approachable and trustworthy. Expanding the number of women BCs in rural areas could significantly enhance financial accessibility for women.
The ripple effects of women’s entrepreneurship extend beyond individuals, benefiting entire communities and fostering grassroots economic development. While India has made significant strides in broadening its credit base and bringing rural areas into the fold of financial inclusion, continued policy interventions are essential to dismantle remaining barriers and establish a more equitable financial system.
Financial inclusion is crucial to achieving the economic empowerment of women—one of the key targets under the fifth Sustainable Development Goal on gender equality. Addressing existing challenges and fostering a more inclusive financial ecosystem will be pivotal in unlocking the full potential of women entrepreneurs and ensuring their sustained progress.