Funding Sources for Women Entrepreneurs

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SMALL BUSINESS FINANCING FOR WOMEN IN INDIA

By Priya Florence Shah

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Arranging for finance is one of the top hurdles women face when wanting to

startup a small business in India.

According to some reports, few women entrepreneurs in India seek big-ticket

funding from financial institutions. They depend instead on their savings,

limiting the potential to scale their businesses.

Six out of 10 women entrepreneurs started their business with a capital of

under INR 1 lakh, a majority of which used personal funds and savings were

used to start the business.

Women entrepreneurs in India find banks the most difficult source for

obtaining funds. The easiest source for getting funds for Indian women

entrepreneurs is Angel investors.

However, if you have persistence and do not want to opt for angel financing,

you can turn to a bank for a small business loans. Women entrepreneurs are

entitled to soft loans and many special schemes have been set up for them.

This report will cover

Bank Schemes for Small Business Loans for Women Startups

Indian Government Loans for Women Entrepreneurs and

Angel Financing for Women Startups

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SMALL BUSINESS LOANS FOR WOMEN STARTUPS

As of 20th November, 2013, the Reserve Bank of India (RBI) directed public

sector banks (PSBs) to provide loans to women self-help groups at a rate of 7

per cent per annum so as to get the benefit of interest rate subvention scheme

under the Swarnajayanti Gram Swarozgar Yojana-Aajeevika (SGSY) scheme.

The Small Industries Development Bank of India (SIDBI) has been

implementing special schemes for women. The Mahila Udyam Nidhi (MUN)

Scheme provides equity support to women entrepreneurs for setting up

projects in Tiny Sector.

Mahila Vikas Nidhi grants loan to rural women to start ventures in the field

like spinning, weaving, knitting, embroidery products, block printing,

handlooms handicrafts, bamboo products etc. They have a number of other

schemes such as the Marketing Development Fund for Women.

In 1993, Rashtriya Mahila Kosh was set up to grant micro credit to poor

women at reasonable rates of interest, with very low transaction costs and

simple procedures.

Many schemes that are exclusively for women provide relief in terms of

collateral security and interest rates. But if the woman’s ownership in a

company is less than 50%, the benefits of women’s schemes cannot be availed.

Under Oriental Bank of Commerce’s Orient Mahila Vikas Yojana scheme, there

is upto 2% concessions and no collateral security for loans upto Rs.10 lacs and

in case of SSI no collateral security required up to Rs.25 lacs.

Under the Bank of India’s, Priyadarshini Yojana scheme, no collateral security

is required for loans up to Rs 5 lakh and for small-scale industries (SSI) units,

and there is a relief of interest rates from 0.5% to 1%.

Under SBI’s Stree Shakti Package, security is waived for loans up to Rs 5 lakh

for industrial units. State Bank of India (SBI) and Canara Bank also have

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special cells for women entrepreneurs. Besides consulting, these cells provide

training, counseling and, at times, avenues for showcasing and marketing

their products.

Canara Bank took the lead by establishing the Centre for Entrepreneurship

Development (CED) for Women. The bank has also opened exclusive branches

for women — the Mahila banking division — the first of its kind in the

banking industry.

The bankers’ perception about women entrepreneurs is that they are less

likely to become defaulters. There are lesser chances of failures in women

owned enterprises as women generally plan ahead and act more carefully

than men in business.

The disadvantages of applying for loans from banks is that the schemes only

provide minor concessions. The terms and conditions are similar to any other

consumer loans.

Women also complain that the application process is very time consuming and

requires many visits to the bank. The higher the loan amount, the more

difficult it is to avail it.

A well thought-out business plan and marketing strategy is very important in

getting approval for a bank loan.

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INDIAN GOVERNMENT LOANS FOR WOMEN

ENTREPRENEURS

The Government of India has made a number of special provisions for women

entrepreneurs under the watch of the Ministry of Micro, Small and Medium

Enterprises (MoMSME).

In the Seventh Five Year Plan (1985-90) specific attention was paid to

allocations for programmes/ schemes which directly benefited women.

The Women Component Plan (WCP) is a mechanism for identifying and

monitoring schemes that extended benefits directly to women. It was adopted

by the Government to provide assistance to women entrepreneurs.

New schemes, named Women Development Corporations, were introduced by

government to help women entrepreneurs in arranging credit and marketing

facilities.

TRADE RELATED ENTREPRENEURSHIP ASSISTANCE AND

DEVELOPMENT (TREAD)

In the Ninth Five-Year Plan, the Trade Related Entrepreneurship Assistance

and Development (TREAD) scheme was launched by the Ministry of Small

Industries to develop women entrepreneurs in rural, semi-urban and urban

areas by developing entrepreneurial qualities.

This scheme focuses on women entrepreneurs who are involved in non-

agricultural activity. The Central government provides a grant up to 30% of

the project cost to Non-Government Organisations (NGOs) that promote

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women entrepreneurship. The remaining 70 percent is arranged by the

lending agency in terms of credit.

Additionally, the government also provides a grant up to INR 1 lakh for each

programme envisaged by training institutes or NGOs for providing training to

women. There is also a government-sponsored need-based grant program,

that provides up to INR 5 lakh to nationally-recognized Entrepreneurship

Development Institutes (EDIs).

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ANGEL FINANCING FOR WOMEN STARTUPS

UNITUS SEED FUND

Bangalore-based Unitus Seed Fund invests with a Profits and Values approach

in startups that primarily serve people living at the base of the economic

pyramid (or “BoP”) in India. “BoP startups” are startups that serve large, low-

income populations and that deliver social value.

They invest equity capital in promising for-profit businesses — initially only

in India. BoP comprise the 1.05 billion people in India (5 out of 6 Indians) who

live on an annual household income of less than INR 200,000 as of 2005.

Acceleration through our fund is achieved via seed funding, support and

connections, which help those entrepreneurs refine their plans, scale up their

business, and secure additional growth capital. Networking is needed to scale

those opportunities, so 95% of their mentors are local.

They explicitly state that they want to invest in female entrepreneurs because:

Companies with the highest representation of women on their top

management teams experienced better financial performance than

companies with the lowest women’s representation.

Research concludes that investing in mixed teams where there are

female co-founders have a greater success rate. From an investors’

perspective, having one or more females as part of the executive team

increases your odds of a successful exit.

Traditionally women have been encouraged to go into non-profits, and

thus may be not aware of the opportunities that arise if you were to

choose the for-profit route.

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Some of the criteria which are most important to them:

Strong, experienced management team

Potential for serving up to 100,000 low-income families within 5 years

Business developed beyond the concept stage

Clearly differentiated value proposition

Strategies to build effective distribution and marketing programs

The typical initial investment sizes range from USD$50,000 to $100,000 with

the potential for additional investment capital as critical progress is achieved.

http://usf.vc/

GOLDEN SEEDS

Golden Seeds is one of the largest and most active angel organizations in the

US. Since 2005, Golden Seeds has invested $58 million in 58 companies.

Golden Seeds pursues above market returns through the empowerment of

women entrepreneurs and the people who invest in them.

Golden Seeds invests in companies with gender diverse management teams

and ownership. Typically, the companies Golden Seeds invests in have a

female founder and CEO. However, investments have also been made in

companies with women in other C-level positions.

http://www.goldenseeds.com/

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SPRINGBOARD

Springboard is a highly-vetted expert network of innovators, investors and

influencers who are dedicated to building high-growth technology-oriented

companies led by women.

Their programs and initiatives help source, qualify, advise, showcase and

support the most promising businesses seeking capital or partnerships for

product development and expansion.

They are a non-profit 501c3 organization based locally in the USA but acting

globally to accelerate women entrepreneurs’ access to growth capital.

https://sb.co/

WOMEN INNOVATE MOBILE (WIM)

The first startup accelerator focused exclusively on launching and accelerating

the growth of women-founded companies in mobile technology. Through its

network of mobile experts, mentors and investors, WIM provides women

entrepreneurs with the tools, feedback and connections needed to launch and

scale their mobile ventures.

Women Innovate Mobile is investing $18,000 in each company selected as

well as other valuable resources: feedback and guidance from mentors and

advisors, instructional programming, and design and development services

from our service providers. In return, WIM receives a 6% equity stake.

Criteria:

Tech startups

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A woman founder or co-founder

Focused on building a mobile technology product.

For the duration of the program you need to live in the area of New York

City and you must be legally in the U.S. during the program.

Have a business model deck to show that you’ve thought through your

business in terms of what problem you’re trying to solve, the size of the

market, how you’re going to generate revenue, your competitive

differentiation, etc.

http://wim.co/

CARTIER WOMEN'S INITIATIVE AWARDS

The Cartier Women's Initiative Awards are an international business plan

competition created in 2006 by Cartier, the Women's Forum, McKinsey &

Company and INSEAD business school to identify, support and encourage

projects by women entrepreneurs.

Based on the quality of the plan and the persuasiveness of the verbal

presentation, one Laureate for each of the six regions is selected and receives

a unique and comprehensive support package: US $ 20 000 of funding, one

year of coaching, networking opportunities and media exposure.

http://www.cartierwomensinitiative.com/

CROWDHELPS

CrowdHelps is a global crowdfunding platform dedicated and geared

specifically towards women, where everybody can help change a life of a

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woman by donating funds, professional advice, free time or just supportive

kind words directly to her.

Anyone including friends, family members, or just caring individuals can

create a Fundraising Page to tell the story of an individual woman in need of

any assistance necessary or just to get the word out for any life situation.

http://www.crowdhelps.com/

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