In a post on the social media networking website LinkedIn, Jain recounted how her company was allegedly denied an overdraft facility solely because it lacked a male co-applicant, despite being led by female directors.
Bajaj Finserv, however, denied these allegations in a statement to CNBC-TV18, stating, “We have no gender-based criteria in our underwriting process. We are more than happy to engage with the complainant. We refute the allegations.”
CNBC-TV18 spoke to Apeksha Jain, the founder and CEO of The Gourmet Jar, Devina Mehra, Founder and CMD of First Global, and Lathika Pai, Founder of SonderConnect and Country Head of VC/PE at Microsoft.
Lathika Pai highlighted a key observation from her recent research: the non-performing assets (NPA) rate for women borrowers is notably lower than for men, at 3% compared to 3.7%.
She also mentioned an interesting insight from NIRA Finance, a fintech company associated with SonderConnect. According to its founders, there are instances where men leverage the better credit scores of women to secure loans.
These are the verbatim excerpts of the interview.
Q: Apeksha, let me quickly start with you about your experience in securing this credit and because the company in its statement to us has refuted these allegations very clearly, I want to understand, was there any issue of over-leverage or credit worthiness, or what specifically was the reason given by the lender for refusing your loan application?
Jain: So it didn’t go to the stage where I was told that, okay this is the reason that we are rejecting the application. Later on, of course, after my post, they called me and clarified. But after my application, I got a call for verification and they were supposed to come over to my office to sign some papers the day after. On the verification call, they asked me who the other director was, and when I told them that it was a female director, they specifically asked me for a male co-applicant and asked me if I could have my husband or my brother or my father as a co-applicant. When I told them that it’s not possible, then they informed me that they could not proceed with the file because of not having a male co-applicant. That’s the reason I went on LinkedIn and posted about this incident.
I felt that it had to be talked about, it’s something that kind of enraged me a lot and I have been running my business for a while. I have taken debt from banks and NBFCs and repaid them as well and I felt that, they should be looking at the CIBIL score, the repayment history, the bank statement, financial, all of that, instead of asking me for a male co-applicant and that’s how this started in a way
Q: In response to your post, Bajaj Finserv said that the issue has been resolved. So, if you could tell us where things stand at the moment, are you still looking at that overdraft facility from them?
Jain: I am not looking at Bajaj anymore. I mean, they did call me and they clarified that they do not have any such policies and the fact that they gave me some other justification for my application to be rejected, but the fact of the matter is that their team, whoever called me for verification, did ask me this question and if I had a recording of it, I could have probably like put it out there, but I do not.
However, if anybody has spent 10 minutes reading through my post and the comments after that on that thread, they can see that it’s not the first time this has happened with somebody who’s applied, a woman who has applied for a loan from Bajaj. It’s not just Bajaj, I think it’s an industry problem because similar incidents have been reported by other women with ICICI, HDFC and other banking institutions as well.
Q: Devina in your experience as a leader, as a woman entrepreneur, how common is it to face gender-based discrimination in the lending process itself? Are there specific loan segments, for instance, business versus personal, where this may be more common?
Mehra: I don’t have personal experience because I bootstrapped my venture so I did not raise outside debt or equity. So it was especially not at the initial stages at all. So I don’t have firsthand experience of this particular thing, but I mean, gender bias exists in many, many ways. For example, if you look at venture capital, not just in India, but even in, let us say, which is a more developed market, the US, far fewer women-founded ventures are funded. The amounts they get are also lower.
It was very interesting that a study was done on the process of deciding on whether or not to fund a venture and what they found was that when it was a man presenting etc. It was about the scope but when it was a woman, the questions were very skewed towards what can go wrong, what are the risks, etc. so the questioning itself was completely different. People will say that there’s no gender bias and it’s only because, the women-founded ventures are not that attractive, that they weren’t funded, but the process itself showed that there was a bias.
But this was quite a shocker when I read this on LinkedIn, because this is not something I expected, especially in the financial sector, where there have been so many women leading institutions over the years. So it was quite a surprise to hear something like this.
Q: Lathika, just to take that forward, we are talking about an experience with an NBFC. Devina also pointed to the fact that there’s some venture capital world where you typically see perhaps the funding to female founders not as high as their male counterparts. So in your experience, is it very different between the traditional players and the venture capital VC world when it comes to women entrepreneurs raising funds?
Pai: So is there a bias? The answer is absolutely yes. I think we have to address the elephant in the room. If the risk, if there is a proposal which is out there, that is considered risky, they will look at the gender and decide whether they want to go with this particular team or not. Female-led teams are not going to be as favorable as male-led teams. Have we seen a change over the past decade? The answer is yes. So that’s the good news. I think we should look at the factors. Are we stuck in the dark ages as far as the venture capital side of the world is? The answer is no. There are more women in investing and there are more women who are being invested in. Is that number sufficient? No.
Apeksha, thank you for bubbling this up on LinkedIn and making several of us aware of this. I think the fact that Apeksha has been in business for a very long time, the only thing that really should matter is her creditworthiness. Asking for a male guarantor is appalling. This is debt and the debt should be looked at and classified based on the quality of the debt and not on whether there’s a male or female guarantor.
Q: Lathika, in your own experience, if not in your colleagues, perhaps your peers, have you seen instances where female founders have had to go through more questions or more delays or more rejections in their applications versus their male counterparts simply because of this gender bias?
Pai: Yes. I think the reason why we started SonderConnect, which is the platform for empowering women is to be able to help these women founders find the network and connect them to the right people. Today, a couple of banks that we work closely with who support us, IDFC First Bank, have no such criteria. They welcome the fact that it is a women-led business. We need more banks out there to be proactive in terms of helping founders. HSBC, again, I know, is very, very proactive in terms of going after women-led businesses. So yes, gender bias does exist.
Does it take longer for both getting debt, working capital, and also VC funding? The answer is yes. We have a long way to go.
Q: Apeksha, in your own experience as an entrepreneur and fellow female founders, that you may have been speaking to, is this the very first time you have heard of something like this? Have there been more incidents like this with you in the past? Have certain organisations been better than others in dealing with these kinds of issues?
Jain: I think definitely like this was the first time it was so outright where somebody actually asked me that is there a male applicant. But there have been several instances whether it’s the investor, VC world or whether it’s banking institutions that they do have the gender bias for sure. Like, investors have questioned when you plan to have children, for example? Like they would never ever ask a man that kind of question. They question about how do you balance work and home and, things like that, which I don’t think they ever ask a man, like, how they balance home and work.
Also with the other, like, NBFCs and banking also, like, this is not the first time I applied for a loan or a credit. I have had several applications in the past, which were approved. And I had a male co-founder at that point in time and I was never asked that kind of question at that time. But there have been cases where now when I don’t have a male co-founder or I don’t have a male director on my board, these questions arise, who else is the director? What does the other director do? What does their husband, to the extent that they have even asked me, what does the husband of the other director do? Can we have his KYC?
So it’s an inherent practice, even though they refuse to acknowledge it, but it exists out there for sure.
Q: Devina listening to what, some of the other panelists are saying, what are the tangible consequences of this kind of discrimination on women-led businesses, in terms of hindering their growth, their access to capital, and overall financial stability itself?
Mehra: I mean, it has a big impact and it is very pervasive, and I think it is pervasive in the society itself. Apeksha spoke about the banks or the venture capitalists asking these questions, unfortunately, even as recently as in the last year or two every time I am interviewed by a young woman, very often they will ask me that if, it’s like a woman in finance or something, that how do I choose a career where I can balance home and family and it breaks my heart because no man has ever asked me this. So it’s only, only the young women, because they have also internalised this conditioning that they have to look after the home along with the career that they have that it is not going to be an equal thing at home.
So a part of it is societal and the conditioning, but the unfortunate thing is to see it out there in this blatant term in the workplace. So there’s always, of course, subtle discrimination in the workplace, women getting talked over more, even somebody like Indra Nooyi, even up to the time she reached the PepsiCo boardroom, writes that the same idea coming from her would be called too theoretical and then the next guy would pick up the same idea and the board would accept it till she started to like kind of point it out jokingly. So there are all these levels.
Even way back when I was at IIM Ahmedabad, I remember we were a five-girl looking for one more member and no guy wanted to join a five-girl group and no matter how many times we said that we often joined five-girl groups, but it’s different.
Q: Lathika, in terms of data to sort of quantify this kind of gender bias that we see, is there quantifiable data to see that and what can be done to overcome this? Because unless you have, I guess, statistics to show these kinds of lenders, solutions will not be forthcoming.
Pai: I just did a little bit of research, before coming on the show, and there was an article which clearly shows that the NPA, the non-performing assets of those women borrowing versus the men borrowing, women was at 3% NPA versus men at 3.7% NPA. What’s also interesting is when I did speak to one of the SonderConnect, fintech companies, lending companies, NIRA Finance, what their founders told me is that many a time there are men who request female because they have a better credit score to borrow on using the female’s credit score. That was an interesting fact to me that today, it is the women’s score, women’s earning capability that’s pretty high and the fact of the matter is that women are that much more diligent as the data shows in terms of repayment of loans.
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