Remarks by George Deikun, Mission Director, USAID
India, at Bizwomen's Conference, Bangalore
August 06, 2005
Good morning; Shri P. Chidambaram, Honorable
Union Minister of Finance; Ms. Rajshree Pathy; Ms.
Pallavi Jha; other accomplished entrepreneurs; and
honored guests.
It is truly a pleasure to participate in today’s
conference and particularly on a theme that is
critically important for India’s economy, and for
48% of India’s population, its women. In sponsoring
this conference, USAID and our many partners intend
that you, women entrepreneurs, will be inspired by
and learn from the success of others in developing
winning strategies for business growth, positioning
yourselves in a global market, and gaining access to
capital. The presence of the Honorable Union
Minister of Finance Chidambaram in itself indicates
the importance that the Government of India places
on job creation through business development, and
the growing role of women in the economy.
I think you will agree that these are exciting
times for our two countries. With the recent
historic meeting between Prime Minister Manmohan
Singh and President George Bush, relations between
India and the United States have never been better.
Building on common values and interests, the two
leaders have agreed to work jointly in many areas
including trade and investment. USAID’s sponsorship
of this conference alongside Indian business and
finance institutions is a practical demonstration of
how our countries can work together.
As we all know, a vibrant small and medium
enterprise sector plays a significant role in a
country’s economic growth, whether it is a developed
or developing economy. In the United States, 26
million small businesses generate more than half of
the nation’s gross domestic product, create 80
percent of its new jobs and employ over half of the
private sector work force.
Here in India, the small scale industrial sector
continues to grow at a faster rate than the
industrial sector as a whole. Indian Small Scale
Service and Business Establishments are becoming a
leader in knowledge technology, services and
communication. Presently there are over 3 million
registered small industries providing employment to
around 18 million people. These numbers
underestimate the real significance of small
business for employment since a majority of small
enterprises in India operate in the informal sector.
As a result of the economic reforms started in
1991, the number of venture funds in India has
grown, particularly over the last few years.
However, investments are either heavily in the IT
sector or mature companies, leaving early-stage
growth companies with dynamic entrepreneurs starved
for capital. Surveys show that the average
investment per deal has more than doubled from
around $4 million to about $8 million, benefiting
larger rather than smaller companies.
In order to help address the capital constraint
that small businesses face, USAID, through the Small
Enterprise Assistance Funds organization – SEAF –
joined with Kotak Mahindra Bank to establish a
venture capital fund dedicated to businesses that
traditionally have trouble accessing equity funds:
smaller companies, enterprises in sectors other than
the “glamour” industries of IT or Business
Processing, and women-owned businesses. USAID
committed $5 million to seed the investment fund,
which is managed by SEAF and Kotak, and has now
helped leverage $50 million from Indian and
international financial institutions. We understand
that more investors are expected to join, increasing
the fund to $90 million by the end of the year. SEAF
also helps businesses to improve their marketing
strategies, operations, financial controls and
corporate governance, and access finance.
As a parallel to this investment in small
business, USAID also partners with microfinance
institutions such as Friends of Women’s World
Banking, which support very small scale women-owned
income generation efforts.
Why is it important to support women
entrepreneurs?
First, many studies show that women are a good
business risk. Globally, women’s repayment rates for
micro-loans are high, at more than 95 %.
Second, though women tend to become owners or
managers with less prior experience or training than
men do globally, they possess qualities that have
proven to be valuable in the business world. Studies
suggest that they are less hierarchical, better
listeners, and more talented at multi-tasking, and
that women managers liberally seek and exchange
information to make informed decisions.
Third, women-owned firms play a greater role in
creating jobs. In the US, for example, employment
expansion at women-owned firms was double the rate
for all firms over the last six years.
Last but not least, when women are involved in
income earning opportunities, the whole family
benefits. Families are healthier, better fed and
their income and savings go up.
Despite these benefits and the strong growth in
women-owned businesses, women have received a
disproportionately low share of venture capital
funding. Again in the US, while the number of firms
created and managed by women has grown twice as fast
as that of all firms, women owned businesses receive
only 5% of available capital.
In India, women-owned businesses doubled from 10%
of private sector enterprises in 1991 to an
estimated 20% today. However, there is room for
further improvement. AWAKE – one of the partners of
this conference – estimates that only about 12% of
small-scale units are women owned. Given the
economic benefits of investing in women-owned
businesses, more needs to be done.
How can we collectively improve this situation? I
would recommend the following:
First, policy reforms are needed that will
improve the environment for small business and
therefore women-owned enterprises. World Bank data
shows that it takes nearly 90 days on average before
a company can start operations in India. Compare
this to Australia where it takes just two days to
start a business or the South Asian average of 46
days. There are approximately 11 procedures required
to start a business, versus 9 for the Asia region
and 6 in developed countries. These numbers need to
be lowered.
Second, the financial sector needs to reach more
small and medium enterprises. Less than 20% of
lending goes to these businesses. Moreover, the role
of venture capital, while growing, is still minute.
This conference itself is an excellent step in
advancing women entrepreneurs in India. I am glad
that USAID is part of this effort, and very pleased
to have such a range of local financial
institutions, corporations, and associations as
partners. I encourage the women entrepreneurs to
take the lessons and insights that you learn today
and prepare yourselves to approach the financial
institutions to access capital that will position
your companies for solid growth.
I wish to thank SEAF and its partners including
Kotak Bank, Reliance Energy, SIDBI, and the Ford
Foundation for the opportunity to participate in
today’s important event.
Thank you.
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