This article was written by Swati Sawhney, Salome W. Kimani and Alexander Sotiriou. The original article was published by CGAP. You can find the article here.  

Highlights

• Women-led nano and micro enterprises (WNMEs) are essential to livelihoods and local economies but face persistent barriers including limited start-up capital, restricted credit access, and a widening digital divide.
• CGAP research indicates that these WNMEs face persistent barriers including limited start-up capital, restricted access to formal credit, reliance on under-resourced informal networks, and a widening digital divide. These challenges are compounded by gender norms, limited asset ownership, and a lack of tailored financial and nonfinancial support.
• The report introduces a nuanced segmentation framework based on eight dimensions—size, mindset, ability, household role, business sophistication, network access, sector, and location. These dimensions reveal that WNMEs are not a homogenous group: for example, women with lower education, no access to networks, or poor record-keeping practices face significantly higher credit gaps. Nano enterprises, especially those oriented toward livelihoods, are more vulnerable and underserved than their micro or growth-oriented counterparts.
• Based on in-depth research in India, Kenya and Uganda, the report recommends a coordinated ecosystem approach —combining financial and nonfinancial support, strengthening semiformal finance, closing the start-up capital gap, and bridging the digital divide. Interventions must be tailored to enterprise type and stage, with differentiated strategies for livelihood-oriented, aspiring growth, and growth-oriented WNMEs.

Executive Summary

Women-led nano and micro enterprises (WNMEs) are a powerful testament to the resilience, creativity, and entrepreneurial spirit of women across the globe. These women-led enterprises not only provide livelihoods and income for families, but they also invigorate communities and fuel local economies. Yet, despite their significant contributions, WNMEs often face a complex web of financial and structural barriers—from insufficient start-up capital to limited networking opportunities to a persistent digital divide. By recognizing the vibrant diversity within this sector and acknowledging the distinct needs of different enterprise segments, policymakers, funders, and financial services providers (FSPs) can unlock transformative opportunities for women entrepreneurs.

Successfully supporting WNMEs requires a nuanced understanding of their challenges and the implementation of tailored, high-impact solutions that address their diverse needs. This Focus Note highlights five interconnected challenges faced by WNMEs that have significant implications for their growth, financial outcomes, and sustainability. It also provides potential solutions to address these:

1. Recognizing WNME Heterogeneity

WNMEs vary in size, business models, and risk profiles. A lack of granular data often leads to ineffective policies. Robust segmentation and tailored support are essential for high-impact interventions.

2. Bridging the Start-up Capital Gap

Many WNMEs operate in low-barrier, high-competition sectors due to limited savings and assets at start-up stage. Expanding funding through grants, concessional loans, structured savings programs, and policy reforms can improve access to capital and foster growth.

3. Enhancing Informal and Semiformal Networks

Reliance on informal and semiformal lending networks (e.g., VSLAs, SHGs, chamas) is common, yet these networks face constraints. Strengthening their lending capacity, digitizing record-keeping, and integrating alternative credit assessments can enhance accessibility and financial inclusion.

4. Going Beyond Credit

While credit gaps exist, many WNMEs prioritize business support services over loans. Livelihood-oriented WNMEs can benefit from financial resilience programs and market diversification, whereas growth-oriented enterprises require business development training, mentorship, access to markets, and financial management tools. A phased approach linking credit with training has the potential to significantly improve outcomes.

5. Closing the Digital Divide

Digitization is crucial for business growth, yet WNMEs, particularly the smallest ones, and those in rural areas, lag in adoption. Expanding access to affordable digital infrastructure, providing digital literacy training, and developing user-friendly financial products are key to bridging this gap.

While the above summarizes the most prominent challenges faced by WNMEs, there are several other key considerations that emerge. First, there is a clear distinction between Nano and Micro Enterprises. Nano enterprises—small, own-account businesses— are vital for sustaining livelihoods but remain highly vulnerable to economic shocks and face even more acute challenges in accessing credit. Women-led nano enterprises (WNEs) are a diverse group—varying in growth potential, education, and access to networks— yet across this diversity, they experience consistently greater vulnerability. This underscores the need for nuanced, tailored interventions that account for the different contexts and challenges WNEs face. See Figure 1 for a breakdown of enterprises by type.

FIGURE 1. Number of enterprises operating, by type

In addition, it is essential to distinguish between livelihood-oriented and growth-oriented enterprises. Expanding the traditional focus, MSME policies must extend beyond growth-oriented enterprises to include livelihood enterprises as well. This is because micro and nano units—although often single-person operations—play a critical role in self-employment and income generation for millions, particularly in informal and rural economies where formal job opportunities are more scarce. Some enterprises may transition between the two categories as they evolve, requiring policies that can adapt to these shifting dynamics.

Finally, in identifying the most underserved enterprises, this paper highlights seven key dimensions—in addition to size—that influence NME outcomes: mindset, household role, ability, business sophistication, network access, sector, and location. While these dimensions vary across countries, the findings consistently show that access to networks and level of business sophistication [record keeping] as seen in Figure 2, are the ones that have the most significant impact on access to credit.

FIGURE 2. Most underserved WNE segments and their credit gap