Women have been considered to be responsible borrowers. It is believed that they use credit for the betterment of the families, bringing in a larger impact as compared to that of men as they are better at managing finances. We look back at 13 years of our experience to see how true this is.
Women are turning out to be far more creditworthy than men. But that wasn't really the case a few decades ago. There was a stark indifference towards lending formal credit to women. Banks would sideline them for unavailability of collateral or speculation regarding timely repayments. But today, With 4.7 crore active woman borrowers, 61% of the women consumers have a credit score greater than 720, whereas only 56% of male consumers have a CIBIL score greater than or equal to 720, according to the latest report by Transunion Cibil.
The change began in the early 90s, with the introduction of the concept SHGs by NABARD, there was a shift in how the creditworthiness of women was viewed. Women-led enterprises were supported and promoted. This establishment of SHG units enabled women to take charge, create and run a business and manage credit and cash flows. While women were often denied credit, the SHGs enabled the women to build their creditworthiness. With an urge to empower women, financial institutions began lending on a larger scale to women. It was seen that empowered women were significantly and efficiently able to contribute to the health and wealth of their families.
This gave the much-needed push to the women to build their livelihoods and access credit to fulfil their needs at a time of emergency, to secure a livelihood, shelter, meet children’s educational expenses and other needs of the family. To make women independent, they need to be financially independent first. Entrepreneurship and skill development, along with easy access to credit, therefore, contributed significantly to lower the exclusion of women from accessing credit.
What has our experience been?
Rang De, has been focusing on empowering women and fulfilling their dreams by providing customized, affordable, and low-interest credit. 84.26 per cent of Rang De's current borrowers are women. Among the 29 impact partners of Rang De, 12 of them are organizations set up with the sole aim of empowerment of women. Belonging to low-income families, these women are successful farmers, entrepreneurs, street vendors. The loans from Rang De have provided the women with the much-needed credit to grow their businesses and support their families. . The CEO and Co-Founder of Rang De, Smita Ram, tells us that Rang De's mission has always been to provide access to low-cost credit for communities that have been denied credit in the past.
However, over the years, Rang De's impact stories have shown that when women have the power to make decisions, the change is not limited to them alone. This is because they think through their aspirations, the credit needs and usage and their repayment capacity while availing credit, ensuring lower defaults and greater success stories. Impact, in this case, is no longer limited to the mere growth in business but encompasses the advancement of the family and the community as a whole.
There are numerous reasons for this change in perspective.
Gender Equality - Women are not given decision-making powers in their families, which further increases the existing inequalities. By providing credit, women can contribute to their family income through various small income generation activities. This would contribute to empowering them and gaining the respect of their families and consequently, society. This would, in turn, increase their self-esteem, improve their status in the family and the community, and contribute to greater visibility of women in the public spaces. (D'Espallier, B., Guerin, I. & Mersland, R., Focus on women in microfinance institutions, (2013)
Poverty Reduction - Women invest more for the well-being of their families, and this is not always the case with men. This would lead to the poverty reduction in the families, then the communities, and the nation as a whole.
The efficiency of SHGs - Studies show that women investees are more likely to repay on time. A paper that studies the Grameen Bank, which had initially catered to a majority of male clients, also observed that along with the higher repayment rates by women, they contribute significantly to the economic growth through their various economic activities.
Apart from this women also have been seen to maintain a good credit history. Various studies have shown that the credit history of women is better than that of men. Our investees also show the same trend. At Rang De, the average credit score of women is 668 and that of men is 576. This also reflects the responsible behaviour and creditworthiness of women.
Women without financial means have fewer opportunities than men, especially in rural settings where the need to leverage on additional income is paramount. Customized credit can be a safety net enabling women to explore more opportunities towards their financial freedom. Join Social Investing with Rang De and enable women to make strides with their massive potential. To know more, write to us at smita.ram@rangde.in .