Access to formal credit for women-owned enterprises in India’s unorganized sector: does technology adoption help close the gender gap?

Abstract

Improving access to formal finance is crucial for the growth of women-owned enterprises in emerging economies. This paper investigates whether the use of technology enhances access to formal credit for women entrepreneurs in India’s unorganized sector. Based on enterprise-level data from the Annual Survey of Unincorporated Sector Enterprises (ASUSE) 2022–2023 round, we present the following key findings: (1) Women-owned enterprises are significantly less likely to obtain formal credit and, when they obtain loans, they secure smaller loan amounts, confirming a gender gap in accessing formal credit. (2) Technology usage, captured by computer and internet usage, improves both the likelihood of receiving formal loans and the size of loans for women-owned firms, reflecting the positive effect of technology adoption in bridging the gender gap. (3) Women-owned enterprises adopting technology witness improved access to formal credit through the use of the internet for banking and accessing other financial services. (4) The positive formal credit access-enhancing effect of technology usage is driven by rural firms in terms of loan access and by both rural and urban firms in terms of loan amounts. These results have significant implications for promoting gender equity in accessing formal finance through targeted digital interventions for women entrepreneurs.