Business Loans for Women in India

Published: 17th August 2011
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In India, women business holders are still a minority. Even though with each passing year, more and more women are coming out with their business settings every year, there are still not many women who have the knowledge to take advantage of specialized loans offered by public sector banks. The awareness among women about loans to set up small enterprises is extremely low. Such loans are mostly availed of by husband and wife jointly. However, things have definitely been changing in 25 years since the time the first exclusively for women business loan scheme was introduced by country’s leading bank, State bank of India.
SBI's Stree Shakti package scheme was introduced with the aim of supporting entrepreneurship among women by providing business loans on subsidized rates in retail trade and business enterprises, and also to those who are professionals and self-employed. To avail of this loan and to set up a business enterprise subsequently, a woman seeking the loan will have to invest more than 50 percent of the share capital of the enterprise to be set up. Recently, the Stree Shakti package was modified, reducing the interest rate by 0.5 percent. From women in retail trade who pursue loans up to Rs 50,000, the interest charged will be 8.5 per cent, while for loans from Rs 50,000 up to Rs 2 lakh, there is an additional 0.5 per cent charged on the loan. For a loan to start a small enterprise with project cost of Rs 5 lakh to Rs 25 lakh, the interest charged is 10.75 percent, while for project cost between Rs 2 lakh and Rs 5 lakh, the interest is 9.7 percent, and for the one below Rs 2 lakh, the rate demanded is 9 percent.
However, SBI is not the only bank that provides these exclusive loans to women in business. The women only loan that Punjab National Bank provides to set up small enterprises is called Mahila Udyam Nidhi scheme. Under this scheme, women can start up new projects in small scale for manufacture, preservation and processing of goods (small enterprises include all industrial units and services industries, except road transport operators) satisfying the investment spectrum.
However, projects that avail of any margin money or seed or special capital assistance under any schemes of the Central or the state government, State Financial Corporation, other state-level institutions and banks (except state investment subsidy) are not eligible for assistance under the scheme. Under the scheme, the project cost cannot exceed Rs 10 lakh in case of new projects, including working capital margin and, in case of existing units, for undertaking expansion, diversification and rehabilitation.
PNB provides 25 percent of the project cost with a ceiling of Rs 2.5 lakh per project, while contributors have to pool 10 percent of the project cost. The bank charges about 1 percent of equity assistance service charges.
PNB also enables housewives, in particular, and women, in general, to supplement family income and use their spare time profitably through this scheme by taking up projects as artisans or under village and cottage industries, small-scale industries, small business and retail trade. Under the scheme of financing small-scale industries, bank may also consider industrial projects requiring higher assistance. The eligibility criteria for this are: the woman or the housewife must aged 18 years or above, must have lived in a place for more than six months, she must not have been a member of any industrial cooperative society and not indebted to any cooperative or state agency. Further, amount of loan must be need-based, subject to ceiling of Rs 25,000 per borrower for purchase of machinery or equipment etc, and meeting working capital requirement of one operating cycle.
The borrower will be required to open a savings fund account with the bank in which she must deposit once every fortnight net income after spending such amount out of it as needed for meeting the working or the living expenses. She must also maintain such balance in her savings account at the end of each month as this would enable the bank to debit the said account with monthly installment.

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