Inter‐temporal and spatial variation in credit access to Indian unorganized women entrepreneurs

• Published date: 01 May 2021
• Author: Prateeksha Maurya,Pratap C. Mohanty
• Date: 01 May 2021
• DOI: http://doi.org/10.1002/pa.2192

ACADEMIC PAPER

Inter-temporal and spatial variation in credit access to Indian

unorganized women entrepreneurs

Prateeksha Maurya | Pratap C. Mohanty

Indian Institute of Technology Roorkee,

Roorkee, India

Correspondence

Pratap C. Mohanty, Indian Institute of

Technology Roorkee, Roorkee, India.

Email: pratapjnu@gmail.com, pratap.mohanty@

hs.iitr.ac.in

This study investigates the inter-temporal and spatial variation in credit access to

women entrepreneurs in the unorganized sector using two latest rounds of nationally

representative datasets on unorganized enterprises in India. The study applies a

cross-sectional distributional check to identify the variations. Probit model with ref-

erence category and average marginal effects is used to determine the predictors of

access to formal credit (FC). A robustness test has been performed using a pooled

probit method. Results are discussed in line with relevant literature as well as empiri-

cal findings. The analysis confirms the existence of regional disparities in credit

access to women enterprises. Factors like engagement in diversified activities and

maintenance of accounting records being registered with relevant authorities have

an important bearing on the probabilities to access FC. It is alarming to observe the

marginal improvement over 5 years in the credit share of women-owned unorganized

enterprises. Policy shortcomings are discussed on the basis of inferential statistics.

1|INTRODUCTION

The unorganized sector holds extreme importance for the developing

and underdeveloped economies as it is a major source of livelihood

for the larger populace. This sector helps in facilitating the backward

regions and generates employment opportunities at low cost and thus

reduce economic as well as social imbalances. The terms “unorga-

nized”and “informal”are used interchangeably across the literature.

According to the International Labour Organization (ILO, 2002),

50–75% of all non-agricultural employment in the developing world

exists in the informal sector. The share of the unorganized sector in

Gross Domestic Product of sub-Saharan African countries during

1999–2007 was 38.4% on average as per the World Bank estimates

(Schneider et al., 2010), whereas this is 13.5% in OECD countries

(OECD, 2003). This contribution to gross national income was 41%

for the developing economies and 23.1% for India during the year

1999–2000 (Schneider, 2002). Studies suggest that unorganized

enterprises are generally low on productivity and constrained to

finance due to which they have limited growth opportunities

(Rotheberg et al., 2016).

Women in developing countries are mostly found engaged in

unorganized setups as it helps them to fulfill family obligations due to

time use flexibility. Deterrence to entrepreneurial activities exist for

both men and women; however, female entrepreneurs are largely

affected due to gender biases arising out of socio-economic condi-

tions or certain legal biases such as unfavorable inheritance laws

(Daymard, 2015). The existence of such biases in India is further evi-

dent from poor placement on the economic participation and oppor-

tunity index of the 2018 Global Gender Gap Report (142 out of 149).

The Indian unorganized sector comprises of a large number of micro

and small businesses, which do not have credit access and therefore

suffer from stunted growth. Around 97% of the non-farm unorganized

enterprises did not have access to formal credit (FC) (NCEUS, 2007)

and the problem appears to more serious for women-owned

businesses.

This study investigates the inter-temporal and spatial variation

in credit access to women in the unorganized enterprises in India.

This work also answers the m ajor determinants of cr edit access

for the women-owned unorga nized enterprises

1

and their dynam-

ics over 5 years period, viz., 2010–2011 to 2015–2016. The pre-

liminary emphasis of th is study lies on the demand side factors,

more particularly the o wner's characteristic s and firm

characteristics.

A preliminary version of this paper was presented at the 2018 Pathways to Gender Equality

Conference at the American University, Washington, DC.

Received: 24 January 2020 Revised: 22 April 2020 Accepted: 11 May 2020

DOI: 10.1002/pa.2192

J Public Affairs. 2021;21:e2192. wileyonlinelibrary.com/journal/pa © 2020 John Wiley & Sons, Ltd 1of13

https://doi.org/10.1002/pa.2192