Growth of Financial Services for Women Entrepreneurs

Reduced exposure to financial investments

Priti Rathi Gupta

Indians have typically invested in traditional assets such as real estate, gold and fixed deposits and shunned financial investments. This is evident from AMFI’s findings published in 2018 which showed that less than 1.5 percent of Indians invest in mutual funds. As compared to other countries, there is still a long way to go for India. According to the Reliance Nippon Draft Red Herring Prospectus, as of 2015, total Assets under Management (AUM) to Gross Domestic Product (GDP) ratio in India was only 10 percent as compared to the global average of 55 percent. In comparison, countries like the USA and Australia have an AUM to GDP ratio of more than 100 percent.

Change in investor behavior

But it is important to note that over the last few years, more and more Indians have started understanding the importance of financial investments. For instance, from 2005 onwards, the mutual fund industry has grown at a yearly rate of 18 percent. As of August 2018, the domestic mutual fund industry crossed an important milestone of managing assets worth Rs. 25 trillion with Rs.4.6 trillion flowing in over 2017-18. India’s life insurance sector – which is the biggest in the world with about 36 crore policies, is posed to grow at 12 percent to 15 percent over the next five years.

Financial empowerment for women – Still a long way to go

Historically, Indian women have been denied equal opportunities. Even though literacy rates have been improving, according to ILO participation of Indian women in the labour force reduced to 27.21 percent in 2017 as compared to a peak of 36.78 percent in 2005. Among those who are employed, Indian women earn 25 percent less than men. Fidelity Investments conducted a study which highlighted that 8 out of 10 Indian women don’t discuss finances with even those who are close to them.

Women Entrepreneurs are playing a significant role

As per data provided by IRDA, 32 percent of individual life insurance policies sold in 2017-18 were bought by women. Despite lack of comparative data, industry leaders feel that this signifies a surge in women policyholders largely due to financially independent women. India’s popular tax management platform – Cleartax reported that between November 2017 and March 2018, there was huge increase in the number of female users.

One can largely attribute these trends to the growth of female entrepreneurs in India. As of 2018, around 8 million Indian women are running or have started businesses in India. 10 percent of formal enterprises in India are run by women. This has been primarily due to better access to education, increasing social acceptance of female entrepreneurs, improving infrastructure and easier availability of financing.  58 percent of female entrepreneurs started off between the age of 20 and 30. Almost 73 percent of female entrepreneurs reported a yearly turnover of Rs 1 million. These businesses are largely spread across professional services, IT/ITES services, Apparels, Food & Beverages and Manufacturing.

It is also estimated that businesses owned by women entrepreneurs in India will thrive and grow by 90 percent over the next five years as compared to 50 percent for similar businesses in the US and 24 percent in the United Kingdom.

A promising future

As the number of female entrepreneurs grow and thrive, they are certain to redirect a significant part of their savings towards creating financial assets. These business leaders would also play an important role in influencing women across India to get educated and empowered about investing regularly through systematic investment plans and securing their future by purchasing adequate insurance. Incidentally, women may turn out to be better investors than men as proven by a study conducted by the University of California. Its findings showed that women made o percent more than men while trading stocks.

(Views expressed in this article are a personal opinion of Priti Rathi Gupta Founder LXME and MD AnandRathi Group.)

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