Gender, geography and access to finance: rethinking the urban advantage for women entrepreneurs in India

Purpose The paper explores the spatial context of female entrepreneurship and their access to finance in India. Specifically, we investigate the access to finance of female micro, small and medium enterprise (MSME) entrepreneurs in rural and urban areas using both formal and informal financial systems. Design/methodology/approach We employ probit regression to assess the impact of location on female entrepreneurs' access to finance in India. We utilise the Sixth Economic Census data for 2013–2014, encompassing data on more than 8 million micro and small women-owned enterprises. We classify finance into formal (bank loans, government assistance) and informal (money lenders, self-help groups) sources. Findings Contrary to the popular perception of an urban advantage, our analysis shows that rural female entrepreneurs are better off in terms of access to finance compared to urban female entrepreneurs. This enhanced access is due to higher government assistance, loans from non-institutional lenders/moneylenders and support from self-help groups in rural areas. We also find that caste significantly constrains financial access, highlighting the intersection of gender, geography and social identity. These results are robust to alternative model specifications, like instrumental variable estimations. Originality/value This study contributes to the literature by focusing on the interplay between gender, geography and access to finance. Unlike previous studies that compare male and female entrepreneurs, we capture stratification between urban and rural women entrepreneurs. Additionally, we incorporate both formal and informal sources of finance while most studies on gender and financial access solely looks at formal finance.