Author: Ashraf Rehman, Fellow, The Green Institute & Columnist
Walk through the lively commercial streets of Dimapur or the community markets of Kohima, and you will encounter a dynamic network of micro-enterprises spinning units, farm stalls, and tiny retail shops primarily run by women.
Throughout the developing nations, microcredit has been widely promoted as the key equalizer for these foundational economic drivers.
From its origins with Professor Muhammad Yunus’s Grameen Bank in the 1980s, the practice of providing small, low-barrier loans promised to turn "job seekers into job creators" by transitioning informal enterprises into the formal economy.
The Structure of Exclusion: On-the-Ground Data
During the field survey engagement with 205 small and informal business owners in Nagaland, our survey aim to examine how women-owned firms interact with formal financial institutions for loan accessibility.
The study precisely focused on entrepreneurs operating in community markets, small retail outlets, agricultural businesses, and home-based enterprises in the semi-urban, rural and hilly centres such as Dimapur and Kohima.
These businesses represent the economic backbone of many households and are precisely the category targeted by national women-focused financing schemes, including Mahila Udyam Nidhi, Udyogini, and Annapurna.
It was also capture in the survey that around 50 percent were aware about financial schemes, while only 22 percent were able to secure credit from banks. This shows a ground reality which sharply illustrates the “Awareness-Access Gap” in the region.
Key Observation from the survey:
A key observation from the interviews and field interactions is the existence of a government credit scheme rarely translates into actual access to financial support for women entrepreneurs. Although, it was evident in the survey that most respondents were aware of the financial programmes or loans, yet many had never actually applied for institutional credit.
Women frequently reported difficulties understanding eligibility requirements, completing documentation, or meeting collateral expectations.
In contrast, male entrepreneurs appeared more likely to navigate formal lending channels successfully.
The implementation gap was particularly visible among micro-enterprises. In addition, the businesses operating informally or at a very small scale often failed to satisfy the assessment criteria used by commercial banks, despite being the intended beneficiaries of financial inclusion policies. Thus making them financially excluded from the schemes.
Emerging Pattern:
The field survey advocates that exclusion is not primarily caused by the absence of the credit programmes but rather by a mismatch between the design and local entrepreneurial realities. Moreover, the survey unfolds repeated interconnected patterns
Interconnected patterns repeatedly appeared:
It was documented in the survey that institutional banks favour formalised and registered enterprises over home-operated businesses. In addition, women-owned businesses concentrated in micro and informal sectors are frequently treated as high-risk borrowers.
Firm-size criteria act as an invisible filter. Requirements such as annual turnover and business formalization effectively exclude many female-run enterprises before the actual applications being considered for credit.
The existence of poor financial awareness with the banking procedures and government schemes often reduces women’s participation in the credit market ecosystem and limit their ability to access available resources, even when programmes are formally inclusive.
Together, these factors create a situation in which financial exclusion is reproduced through implementation practices rather than through explicit policy design.
Policy and Institutional Relevance
The experiences of the women entrepreneurs in Nagaland raises a broader policy question: can nationally standardized financial inclusion schemes adequately serve regions with distinct social, economic, and geographic conditions?
With the evidences from the field and given the implementation framework which largely evaluates borrowers on conventional indicators such as; collateral, annual turnover, and business formalization.
The evidence from the field suggests that these measures ignore the fundamental reality of the women led businesses functioning in the informal economic environment.
A more flexible institutional strategy would include collaboratively designing lending systems with local SHGs and community groups, incorporating financial literacy assistance into credit provision, and creating alternative evaluation criteria that acknowledge informal entrepreneurial endeavours.
Such reforms would move financial inclusion beyond the provision of credit and toward the creation of accessible pathways for women participation in the financial credit economy.
The wider insight goes beyond Nagaland. Financial inclusion policies frequently falter not due to a lack of resources, but because the systems for implementation are not adequately aligned with the actual circumstances of the target beneficiaries.
Therefore, effective policy design requires localized institutional architectures which are capable of translating national objectives into meaningful access on the ground.
“This opinion article is based on the Author’s published work from the Review of Business and Economics Studies, Financial University, Russia”
