Economic Reform Today
Organizing for Success: Women's Business Associations
Number 2, 1997
Rajni Aggarwal, President, Federation of Indian Women Entrepreneurs
Rajni Aggarwal is also secretary general of the International Federation of Women Entrepreneurs.
ERT: What are the most important services a women's business association should provide its members?
MRS. AGGARWAL: The most important service we provide is counseling because most of the time women don't know where to start or what kind of enterprise they should take up. So our main thrust is to guide them towards making a decision based on their situation; in other words, assessing the kind of environment they are in or the kind of family support they have. Based on this information we try to help them identify options and make a decision.
Second, we try to see that most of the women get help with the formalities required by the government and with acquiring financing. Government purchases are important to many businesses and learning how to tender offers to the government is important to their success. For example, someone may have a tailoring shop but doesn't know how to sell its services to the military. We try to help them out in filling out the tenders, getting their organization registered, etc. It's a form of marketing support.
Training programs are another service we provide. There are women running very small enterprises who don't even have the most basic level of business know-how. In India, the Ministry of Industry has established the Small Industries' Institute that has facilities in all the major cities where women (and men) can get training on manufacturing agricultural products, jewelry, and other products. We assist women entrepreneurs to obtain training at these government-owned facilities, as well as at others established by some private companies.
Fourth, women often are not able to get the information they need to run their businesses. We provide it to them because often their involvement in family affairs is so great that they do not have time or they are not able to gain access to information they need for their businesses. We also encourage them to come at least two or three times to one of our local chapters and interact with other members. Newsletters are also an important means of providing essential information to our membership. We find it useful to ask members for different topics and ideas for our newsletter.
ERT: How is the Federation of Indian Women Entrepreneurs (FIWE) structured and what are its goals?
MRS. AGGARWAL: FIWE started in 1966 as an umbrella organization for local organizations around India. FIWE was part of the Federation of Small and Medium Enterprises (FISME) but in September 1996, we separated the two organizations, though our objectives and mission remain the same. FIWE doesn't promote direct membership except from New Delhi where no local group has been formed yet.
There was a reason for the separation. We felt that since we were a part of a larger organization, we were unable to work independently on certain issues which are very important to women. After so many years in existence, FIWE did not even have its own offices or permanent staff. But we still work together with FISME.
Now that FIWE is a separate organization, its principal goal is to foster the economic empowerment of women by helping them to become successful entrepreneurs. Another objective is to bring women business persons together to voice their needs and demands in such a way that government enacts policies beneficial to their interests.
The main objective for FIWE is to interact with national government
policymakers so that they understand the needs of women entrepreneurs.
ERT: What types of members does FIWE have now?
MRS. AGGARWAL: Our membership is varied. FIWE as a whole has approximately 10,000 members coming from the 17 local associations that are affiliated with it. (Their membership in turn varies anywhere from 350 to 2,000 members.)
Small-scale entrepreneurs account for approximately 60% of our combined membership, large ones represent 15%, and cottage and micro entrepreneurs comprise the remainder. They work in a wide gamut of sectors, from tailoring shops, beauty parlors, printing facilities to steel manufacture.
ERT: How important is it for women's business associations to play an advocacy role before government bodies, both legislative and executive?
MRS. AGGARWAL: This point was recognized sometime in 1993. Everyone felt we are working successfully on a local basis, but that we had no say at the national government policy level. Now the main objective for FIWE is to interact with national government policymakers so that they understand the needs of women entrepreneurs, and these needs are at the grassroots level. I wouldn't claim that we have achieved major changes on this front thus far. But I feel that as we continue to work we'll be able to bring about some of them, possibly by 1998. Given that we have more membership applications and more of our programs have been useful to individuals and local groups, the government will have to realize that women entrepreneurs must be involved at the policy level.
There has been some progress. At a recent OECD meeting, I was pleased to report that, with the help of the Finance Ministry, FIWE was able to get women entrepreneurs on the boards of all of India's major financial institutions, government agencies, purchasing organizations, and corporations. As a result, in the future the needs and requirements of women-owned businesses are more likely to be taken into consideration. Of course, due to the fast political changes India has witnessed in the last two years we've experienced some loss of continuity. However, I feel that if we follow up persistently we will achieve other objectives by next year.
ERT: How do you see FIWE's mission developing in the future? What role would you like to see the organization play over the next five to ten years?
MRS. AGGARWAL: I would like FIWE to become a stronger organization which can work on all important issues related to women entrepreneurs. Interaction with policymakers should occur on a regular basis, so that at any point in time they are aware of our organization and the interests it represents. They should really consider the viewpoints of our association when making any kind of policy affecting women entrepreneurs. I think the approach we are taking will support this kind of advocacy.
Our leadership is very keen to strengthen FIWE. The 20 members of the Executive Committee, our principal governing body, are in constant touch with each other and regularly contact and write to national ministers about key issues of concern to our members. We also have a steering committee which basically functions as the New Delhi chapter, and it focuses on helping to solve the problems that our members face in that city.
ERT: How big an issue is financing for women entrepreneurs? How do you effectively channel women entrepreneurs into mainstream financing channels?
MRS. AGGARWAL: The government has granted several concessions that benefit women entrepreneurs. For example, the Small Industries Development Bank of India and state-level government banks now require that women entrepreneurs raise a smaller percentage of the capital they need. If a man is starting a business, he has to have a funding ratio of 1 to 3; that is, he must put up one rupee for every three he obtains from the banks. But in the case of women, they must put up just 10% and can obtain financing for the remaining 90%. The only limitation is that this kind of credit can be given only to very small businesses. Still, this is a very positive change.
There are two major problems that need to be resolved. First, the commercial banks have failed to provide concessionary interest rates to women-owned businesses. The government defines such businesses as those in which women hold at least 51% of the equity and 51% of all the jobs.
The second issue is that the Bank of India and the government have defined small-scale enterprises as those having a capital of up to 10 million rupees. Because 10 million rupees is much more than the capital of most small enterprises, most of the commercial bank credit continues to go to the larger companies in this range. We have tried to bring this point to their attention. However, since changes only occur gradually we are allowing some time for the government to formulate new directives on this issue to banks and other financial institutions.
On the other hand, the government is not inclined at all to give any kind of concession to women in medium and large scale businesses. The general negative attitude which used to exist is, however, less apparent now because many women who have come into medium and large companies have automatically become part of the mainstream. In other words, they are being treated as industrialists, not as women entrepreneurs per se.
While women in medium and large industries have no problem obtaining commercial credit, cottage, micro and small-scale enterprises are really facing a lot of problems. Women in these sectors are having a hard time to get access to credit. For this reason, since the OECD forum on women entrepreneurs earlier this year, we have decided that a key priority for FIWE in the near future is to work more with commercial banks to devise special credit programs for small women business owners.
ERT: Does that keep them from being able to do business or do they find other channels to get funding?
MRS. AGGARWAL: Thus far they don't really have many financing channels available. In fact, two of the new programs we are thinking about for our organization are to start a business center for the promotion of women-owned businesses and to establish a bank for women. The Secretary of Small-scale Industry, the Secretary of Women and Child Development, and the secretaries of other departments are all very keen on our organization establishing such a banking program. It is possible we will undertake it, but right now I feel that it is too early for us to do it. Maybe after five or six months, we will be in a better position to consider it.
There are other ways in which FIWE can help women entrepreneurs. Every bank in India has failed to promote entrepreneurship among women. Through our organization, we can help bridge the gap. For women entrepreneurs who cannot approach the banks directly, we try to work like a bridge for them.
As long as the objectives of international women's associations are the same,
we should work together and
really become more effective together.
ERT: Are you able to determine which women have good business plans and are the best candidates to apply to the banks for loans?
MRS. AGGARWAL: I find that out of fifty women who approach us, only fifteen are genuinely interested in starting a business. The rest of them are simply forced by their husbands to go forward in order to get some benefits from the government. But if we see a woman entrepreneur who really knows what she is talking about—and that it's not just that her husband wants her to go into business—we'll do what we can to help her request a loan. Initially we were making mistakes by forwarding every application to the banks, and the banks would say many of the applicants were not genuine entrepreneurs. As a result, we now have become strict about making sure that we assist only those women who are genuinely interested in establishing a business.
When we have a finance-related meeting or workshop we invite bankers to be both speakers and participants. Credit financing is the main subject of almost 90% of our seminars, so the inclusion of bankers increases their awareness of the problems facing women entrepreneurs, and they in turn can establish personal contacts with the bankers. It is also important that FIWE has been able to establish a good record with all the banks.
ERT: Once you've made a match between a bank and an entrepreneur, does the entrepreneur become responsible directly to the bank for payments and for any other credit issues that arise?
MRS. AGGARWAL: Yes. Once the loan is approved, the entrepreneur deals directly with the bank. However, the banks do report to us informally on how the borrowers we presented to them are doing. I have seen that 99% of women are very conscientious about their credit obligations, and they have been very regular in repaying them. Maybe one percent of the women face some problem such as a temporary financial crunch and then have to make some kind of new repayment arrangement with the bank. But most of the enterprises have no problem.
ERT: Is there a role for international organizations in promoting the interests of women business owners worldwide?
MRS. AGGARWAL: As our organization realized that globalization has really become an undeniable reality, we thought that it was time that we came together and started working on it. We already had the India-Pakistan joint business council of women entrepreneurs and we were also interacting with Indonesia and other countries. So we decided to form an international federation. The presidents of the national associations of eight countries—Pakistan, Nigeria, Indonesia, Malaysia, India, China, Korea and Australia—founded this international federation called the International Federation of Women Entrepreneurs (IFWE).
The sixth international conference of IFWE is coming up soon in Accra, Ghana. This is very important because these conferences are the only opportunities in which we can get to know what is happening outside our countries. IFWE has really played a very important role in the internationalization of women entrepreneurship, and I feel that this effort is spreading its wings now that Africa has become a part of it and Japan has come forward as well. As long as our objectives are the same, we should come together, we should work together, and we should really become more effective together.