Lenders are starting to see women as a safer choice when it comes to repaying loans compared to men. This trend could lead to financial institutions offering more loans to women.
In the fiscal year 2023, women had a lower rate of loan defaults—only 1.9%—compared to 2.5% for men. This shows that women are more likely to repay their loans on time. The default rate for women has actually decreased from 2.1% the year before, while men’s rate decreased from 2.6%.
In 2023, the number of women taking out loans increased more than the number of men. Women’s active loans grew by 18%, while men’s grew by just 13%, according to CRIF High Mark, a credit bureau. In addition, the average loan amount for women has gone up for various types of retail loans, such as personal loans, home loans, and car loans.
Why are Women Borrowers Seen as Safer?
Experts like Saurabh Mukherjea, the Founder and Chief Investment Officer of Marcellus Investment Managers, say that financial institutions are more likely to lend to women because of the trend of more women repaying their loans on time. He compares this trend in India to what happened in the United States and Korea a few decades ago, when women started earning more and managing finances better.
In rural India, more women are using e-commerce platforms to increase their income and repay their loans. This has led to women becoming more financially independent, and financial institutions are recognizing this shift.
Government programs like Pradhan Mantri Awas Yojana (housing scheme), Pradhan Mantri Jan Dhan Yojana (financial inclusion scheme), and Pradhan Mantri Mudra Yojana (small loan scheme for entrepreneurs) are also helping more women get access to credit and financial services.
As of November 2024, more than 53.95 crore Jan Dhan bank accounts have been opened under the national mission, with 56% of those accounts belonging to women. The share of women in total loans has increased over time. For example, in June 2024, 10.9% of all loans were taken by women, up from 10.3% the year before, according to the Reserve Bank of India (RBI).
Why Women are Considered Safe Borrowers
Banks feel more confident lending to women, especially those involved in self-help or joint liability groups. These groups are formed to help women access loans for business or other productive activities. The reason these loans are considered safer is that women in such groups tend to repay their loans on time. These groups often work together to ensure that everyone repays, which reduces the risk for banks.
The share of women in the total deposits in the household sector is also increasing. As of June 2024, 20.6% of total household deposits were from women, which is slightly higher than the previous year’s 20.3%.
RBI’s Role in Closing the Gender Gap
RBI Governor Shaktikanta Das recently spoke about the importance of the financial sector in reducing the gender gap in economic participation. He suggested that banks can play a key role by creating policies and financial products specifically designed for women. This could include offering loans at better terms or creating easy-to-use digital platforms for women to access financial services.
Das also mentioned two key ways to bridge the gender gap:
- Increasing employment opportunities for women in financial institutions: Financial institutions should hire more women in leadership and decision-making roles.
- Supporting women entrepreneurs: Banks and the government should offer more schemes to help women start and grow businesses. Government initiatives like the Mudra Yojana and special schemes from banks can help women-led businesses succeed.
Overall, the trend of more women repaying loans on time, combined with government initiatives and growing financial independence, is likely to result in more women gaining access to credit, which can further boost their financial empowerment and contribute to the economy.
