Note4Students

From UPSC perspective, the following things are important :

Prelims level: Data related to Financial Inclusion

Mains level: Barriers to Financial Inclusion

Why in the News?

The RBI has highlighted that low labour force participation among women is a significant barrier to financial inclusion and broader economic growth.
- It pointed out that only 7% of the outstanding loans to micro, small, and medium enterprises (MSMEs) are to women-led businesses.

Barriers to Financial Inclusion

Economic Participation: RBI emphasized that greater participation of women in economic activities is essential for financial inclusion and economic growth.
Participation Disparity: Official data shows female labor force participation at 32.8% in FY22, compared to over 77% for men.
Credit Disparity: Women-led businesses constitute nearly a fifth of MSMEs, yet they receive only 7% of the outstanding credit to this sector, highlighting a significant disparity.

Efforts and Challenges in Financial Inclusion

Successes: RBI expressed satisfaction with access to financial services, citing the success of the Pradhan Mantri Jan-Dhan Yojana (PMJDY) scheme and social security transfers.
Addressing Demand-side Issues: While supply-side challenges have been addressed, demand-side issues still need attention.
Structural Barriers: Structural issues such as low levels of capital, labour participation, societal norms restricting women from inheriting property, and limited access to education and training impede women’s financial inclusion.

Stereotyping and Behavioral Issues

Higher Risk Perception: Nigam noted that women borrowers often face stereotyping by financiers, being considered higher risks, leading to higher interest rates, greater insistence on collateral, or outright loan rejections.
Behavioural Challenges: He also mentioned behavioural issues among women borrowers, such as being more risk-averse, less confident in negotiating loan terms, and less likely to apply for new loans due to fear of rejection.

Policy Moves: Priority Sector Lending and Financial Literacy Initiatives

Priority Sector Lending (PSL): The PSL mandate has become a viable business model for banks and micro-lenders, but demand-side constraints persist.
RBI Initiatives: To address these challenges, the RBI has initiated financial inclusion efforts, including opening 2,400 financial literacy centres at the block level in partnership with nonprofits and requiring lead banks to have a literacy centre in each district.

Government Schemes:

	Stand Up India Scheme	Mudra Yojana Scheme	Annapurna Scheme
Launched	April 2016	April 2015 (under PMMY)	–
Objective	To promote entrepreneurship among women and SC/ST	To provide financial support to non-corporate, non-farm small/micro enterprises	To support women entrepreneurs in the food catering business
Eligibility	Women entrepreneurs and SC/ST entrepreneurs above 18 years of age	All non-farm enterprises, including women-owned businesses	Women entrepreneurs planning to start or expand their food catering business
Loan Amount	INR 10 lakh to INR 1 crore	Up to INR 10 lakh, categorized into three types: Shishu: Up to INR 50,000 Kishor: INR 50,001 to INR 5 lakh Tarun: INR 5,00,001 to INR 10 lakh	Up to INR 50,000
Purpose	For setting up a greenfield enterprise in manufacturing, services, or trading sectors	For business activities in manufacturing, processing, trading, or service sectors	For starting or expanding the food catering business
Repayment Period	Up to 7 years with a maximum moratorium period of 18 months	–	36 months, including a grace period of 1 month

About SEHER Program (In News)
- The Women Entrepreneurship Platform (WEP) and TransUnion CIBIL have launched SEHER, a pioneering credit education program aimed at empowering women entrepreneurs in India.
- SEHER aims to facilitate their access to financial tools crucial for business growth and employment creation.