Closing India's Gender Credit Gap: A Call For Bold Financial Reform

By Vivek Tiwari

As India marches forward in its financial and economic transformation, one stubborn gap continues to hold back our collective progress — the gender credit gap. While women are stepping into entrepreneurship in growing numbers and proving their capability across sectors, they still struggle to gain equitable access to formal credit.

This isn’t just an issue of fairness. It’s a matter of national interest.

According to the World Bank, developing countries are home to over 8 million women-owned SMEs. Tapping into this latent economic force could unlock a new wave of inclusive, grassroots-led growth for India.

Debunking the Risk Myth

One of the most persistent misconceptions in the financial sector is that women borrowers pose higher credit risk. But a closer look at the data paints a very different picture. Studies across emerging markets show women’s default rates are significantly lower than men’s, in some regions by as much as 7.4 per cent. In India, TransUnion CIBIL reports that women have a delinquency rate of 5.2 per cent, versus 6.9 per cent for men.

The reason is simple: women tend to borrow more prudently, avoid overleveraging, and maintain strong repayment discipline. Ignoring these facts — and continuing to base credit decisions on outdated perceptions — not only limits inclusion but also weakens the quality of lending portfolios.

Credit Use Tells the Real Story

While more women are accessing formal credit, with loan disbursals growing at a compound annual rate of 22 per cent from 2019 to 2024, there remains a wide gap in the purpose for which credit is used.

In 2024, personal loans availed by women totalled ₹4.8 lakh crore, but just ₹1.9 lakh crore was disbursed as business credit. That’s less than 3 per cent of the total. This isn’t due to a lack of ambition — it reflects a lack of support. Too many women are still forced to rely on informal networks or personal savings for capital, due to collateral requirements, rigid product design, or bias in risk assessments.

The Power of Microfinance in Women’s Empowerment

The microfinance sector has played a pivotal role in narrowing the gender credit gap, particularly in rural and semi-urban areas. Focused primarily on women borrowers, microfinance institutions have enabled millions of women to access timely credit without the burden of collateral, empowering them to build businesses, sustain livelihoods, and support their families. 

Even in today’s challenging macroeconomic conditions, microfinance loans continue to demonstrate low delinquency rates and high repayment discipline — a testament to the resilience and financial responsibility of rural women borrowers.

Unspoken Biases, Unseen Barriers

A large share of potential women entrepreneurs do not apply for loans at all, not for lack of need, but because of the expectation of rejection. When they do apply, many are offered lower ticket sizes or more conservative terms.

India’s lending systems still lack mechanisms that account for businesses run from homes, informal setups, or non-traditional work models that many women navigate. These invisible hurdles often go unacknowledged, but their impact is very real, sidelining vast pools of enterprise potential.

A New Credit Paradigm for Women

Bridging this gap calls for more than goodwill — it requires structural change. Financial institutions must adapt appraisal frameworks to reflect women’s actual credit behaviour. Gender-aware credit products, simplified access, and flexible collateral models are not “niche” offerings — they’re critical to driving scale.

Equally important is the role of financial and digital literacy. The microfinance industry, along with other stakeholders, has conducted thousands of workshops across rural India to equip women with the knowledge to manage finances, understand loan terms, adopt digital tools, and confidently engage with formal banking systems. These efforts have played a vital role in enabling long-term financial inclusion and building resilience among women entrepreneurs.

Government-backed credit guarantee schemes can reduce risk for lenders. Financial literacy programs must go deeper, empowering women with the tools and confidence to engage with formal finance. Most importantly, gender inclusion must move from the margins of policy and be embedded at the core of our financial architecture.

The Multiplier Effect

When a woman gains access to fair credit, the benefits don’t end with her. Her business grows, her family thrives, and her community uplifts. This multiplier effect is not abstract — it’s evident in every corner of the country where women are given the means to succeed.

The case for change is clear. We must stop seeing women as exceptions in finance — and start seeing them as the norm. The future of inclusive economic growth depends on it.

(The author is the Managing Director & CEO, SATYA MicroCapital Ltd.)

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