Register with us

Financial Inclusion and FLFP

March, 2021

India’s impressive economic growth in recent years has not translated into increased participation of women in the workforce. Despite rising education levels, declining fertility rates, and growing GDP, female labour force participation (FLFP) has steadily declined, reaching historic lows. This trend has been exacerbated by job stagnation, high unemployment rates, and the economic impact of the pandemic-disproportionately affecting women, particularly those in informal employment and without social protection.

Among the various factors influencing FLFP, financial inclusion remains a critical yet underexplored component. India has witnessed a rapid expansion in access to formal financial services; however, a significant gender gap persists-driven by structural barriers such as societal norms, limited literacy, and lack of collateral. In South Asia, this gap is among the highest in the world, with women continuing to be excluded from formal financial systems, which in turn impedes their socio-economic mobility.

To address this, targeted strategies are essential. Increasing the number of women working as banking agents could help narrow the gender gap in financial service use, as evidence suggests that female clients are more likely to engage with female agents. Self-Help Groups (SHGs) have shown potential in connecting women to financial systems, but mechanisms are needed to reach the most marginalised and ensure meaningful participation. Streamlining credit access through innovative approaches-such as using non-traditional forms of collateral, supporting long-term investment, and tailoring schemes like the Pradhan Mantri MUDRA Yojana (PMMY) for women entrepreneurs-can further bolster their inclusion. Additionally, stronger oversight of schemes like PMMY and Jan Dhan is crucial to prevent misuse and ensure that benefits reach the intended female beneficiaries.

To truly unlock the economic potential of Indian women, financial inclusion must be recognised as both a tool and a pathway to greater workforce participation.

Resource Type IWWAGE-ISST-BRIEFS

Authors Ayushi Gupta