What restricts credit to women enterprises? Evidence from India’s informal sector

Purpose - The purpose of this paper is to determine the factors which affect the financial access of the female-owned informal enterprises (FOIEs) in India. There has been a dearth of studies particularly targeting determinants of credit access by the women-owned informal enterprises. Demand side factors affecting financial access have been studied. The study of major factors affecting access to credit by unorganized women enterprises will be useful for policy making perspectives. Design/methodology/approach - The study uses nationalized micro data set on the non-agricultural informal enterprises and probit estimation has been used to identify the factors which affect the probabilities of access to credit for the FOIEs. Findings - The study highlights what facilitates and hinders the financial access for the FOIEs particularly in India. These enterprises in rural areas have better chances to avail credit from formal sources. Firm size, measured by policy-making size of employment and gross profit, involvement in diversified activities, maintenance of accounting record, has positive and significant impact on access to formal credit. The younger firms and the firms operating in the southern states of the country have higher probabilities to avail credit from institutional sources. Originality/value - The study used the latest data set available on Indian informal enterprises, thus provides important insights about the status of financing of enterprises in India. This study highlights the regional variations and gender disparities that are prevalent in the Indian economy.