Closing Gender Gaps in India: Does Increasing Womens’ Access to Finance Help?

IMF Working Papers, September 28, 2018

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Closing Gender Gaps in India: Does Increasing Womens’ Access to Finance Help?

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Bibliographic details

• Authors: Purva Khera
• Published: September 28, 2018
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781484377468.001

Summary

• Gender gaps in women’s economic opportunities—labor market and entrepreneurship—have remained high in India.
• Lack of adequate collateral limits women entrepreneurs’ ability to access formal finance, leaving them to rely on informal sources and constraining their growth.
• A small-open economy DSGE model is built to investigate the long-run macroeconomic impacts from closing gender gaps in financial access.

Key findings

• An increase in women entrepreneurs’ access to formal credit results in higher female entrepreneurship and employment, which boosts India’s output by 1.6 percent.
• Regulations and gender-specific constraints in the labor market limit potential gains because females’ access to quality jobs in the formal sector remains restricted.
• The factors influencing the number of females are different from those influencing the share of females in formal economic activity.
• Combining gender-targeted financial inclusion policies with policies that lower constraints on formal sector employment could boost India’s output by 6.8 percent.

Model and methodology

• Analytical framework: small-open economy DSGE model.
• Focus: long-run macroeconomic impacts of closing gender gaps in financial access.
• Mechanisms emphasized: access to formal credit for women entrepreneurs, collateral constraints, reliance on informal finance, and labor market regulations and constraints affecting formal sector employment.

Policy implications and recommendations

• Expand women entrepreneurs’ access to formal credit to raise female entrepreneurship and employment.
• Address regulatory and gender-specific labor market constraints to enable women’s access to quality formal-sector jobs.
• Pursue combined policy packages that link gender-targeted financial inclusion with reforms reducing barriers to formal employment to maximize output gains.

IMF Working Paper: Closing Gender Gaps in India: Does Increasing Womens’ Access to Finance Help?

Content in this bundle

• wp18212 — Introduction, Model Overview, Calibration, and Gender-Specific Policies
  • wp18212 — Introduction, Model Overview, Calibration, and Gender-Specific Policies (Markdown version)
  • wp18212 — Introduction, Model Overview, Calibration, and Gender-Specific Policies (PDF)