Dec'23

Articles

Examining Women Entrepreneurs' Attitude Towards Informal Funding Sources and Their Empowerment in Tamil Nadu: An SEM Analysis

Toopalli Sirisha
Professor, Department of Management Studies, Sri Venkateswara College of Engineering, Tirupati, Andhra Pradesh, India; and is the corresponding author. E-mail: thopallisirisha@gmail.com

Nalla Bala Kalyan
Professor, Department of Management Studies, Sri Venkateswara College of Engineering, Tirupati, Andhra Pradesh, India. E-mail: drnallabala@gmail.com

The main objective of the study is to examine women entrepreneurs' attitude towards informal sources of funding and its impact on their empowerment in Kanchipuram district of Tamil Nadu, India. The study uses structural equation modeling (SEM) for analysis by adopting quota sampling with convenient sampling technique. The respondents were selected from three segments- agriculture-related, dairy and weaving businesses. The results show that the five factors used in the study-loan procedure and processing time, loan amount and interest rate, repayment schedule, flexibility in terms and conditions and easy collection method-have a significant impact on women entrepreneurs' attitude towards informal sources of funding, leading to their economic and social empowerment.

Introduction
An enterprise is the focused activity of an individual or a collection of associated individuals to initiate, continue, or classify a profit-oriented business unit for the production or movement of economic services and goods, according to Cole (1959), characterized entrepreneurship as "the capacity of viewing production opportunity and investment, sorting out an enterprise to attempt another production process, hiring labor, raising capital, organizing the inventory of raw materials and choosing top managers for the day-to-day activity of the enterprise. Therefore, one may just view the term entrepreneurship as a way toward inventing, taking decisions, expecting hazard, bearing vulnerability, and making the enterprise a success.

Recently, women's involvement in business has increased dramatically in India, following the revolution in development and globalization (Metcalfe and Mutlag, 2011; and Women Matter, 2014). The term 'women entrepreneurship' can be defined as the initiative a woman or a group of women takes to organize and operate a business enterprise (Rashmi, 2016). According to Government of India1, women enterprises are those in which women have a minimum financial capital of 51% and at least 51% of the employees are women. Women entrepreneurs are expected to explore the business opportunities in society; identify, assess, and manage the risk; and administer all the functions of business in a coordinated fashion. The previous literature shows that women entrepreneurship leads to women empowerment in the form of increased freedom of choice and action (Narayan, 2002). The United Nations (2001) defined empowerment as women's taking ownership and control of their existence through enlargement of their choices, improving their personality and status in the family and society. Generally, the formal sources of finance such as financial institutions like banks, cooperative societies, microcredit institutions, and self-help groups would take some time to process applications and sanction loans (Abdalla, 1996; Agarwal and Deepti, 2001; and Ahl, 2006). The major problem, on the other hand, with informal sources of funding is high interest rates and lack of transparency.

Entrepreneurship performs a critical role in the socioeconomic growth of a nation and is a significant concern to both policymakers and researchers. In the entrepreneurial ecosystem, women entrepreneurs are considered as new engines of financial growth (Nasir et al., 2019).

The various hindrances faced by women entrepreneurs should be addressed so that they can make a noteworthy contribution to the economic and social development of the country. According to Subhash Chander and Arora (2013), the absence of sufficient information about the numerous schemes of financial institutions for women entrepreneurs and reluctance of officials to finance women entrepreneurs are the main problems.

Currently, women entrepreneurship has turned out to be a significant device for women empowerment. The position of women as entrepreneurs is progressively expanding, and in India, empowering women through business startups has become the norm. Women entrepreneurs additionally help upgrade the living standards of their family, which in turn helps in the development of the nation (Raja Banik and Arundhathi Bai, 2018).

The study investigates the relationship among five factors-loan procedure and processing time, loan amount and interest rate, repayment schedule, flexibility in terms and conditions and easy collection method. The mediation effect of women entrepreneurs' attitude towards informal sources of funds, which in turn leads to social and economic empowerment, is also considered. The paper investigates the attitude-forming factors of women entrepreneurs towards informal sources of funding as assistance to women empowerment. Keeping this in view, the following research questions have been framed:

RQ1: How to assess the attitude of women entrepreneurs towards informal sources of funding and women empowerment in Kanchipuram district?

RQ2: To what extent dimensions of women's attitude towards informal sources of funding, such as loan procedure and processing time, loan amount and interest rate, repayment schedule, flexibility in terms and conditions and easy collection method, have an impact on empowerment of women entrepreneurs?

Data and Methodology
The primary data was collected through survey method, using a structured interview schedule. The study was conducted among women entrepreneurs of Kanchipuram district, Tamil Nadu, India. The sample respondents were selected through quota sampling using convenient sampling technique (non-probability sampling technique). The target population of entrepreneurs with a minimum of one year of experience was made with the intention of capturing respondents who possess a foundational understanding of the complexities inherent in business operations. By operating their businesses for at least a year, these entrepreneurs are presumed to have encountered various challenges and opportunities, thereby offering valuable insights into the dynamics of entrepreneurship. Furthermore, the criterion for a minimum of one year of experience reflects a certain level of stability and sustainability in their ventures, suggesting a capacity to navigate the intricacies of business management. This selection criterion was particularly important for the study's focus on exploring informal sources of funding available to entrepreneurs, as they are expected to provide richer and more nuanced perspectives on this aspect of entrepreneurship.

These informal sources include friends/family members, finance agencies, money lenders, traders, etc. The respondents were selected from three segments-agriculture-related business, dairy business, and weaving business. Almost 1,000 questionnaires (see Appendix) were distributed and only 648 filled questionnaires were used for analysis. The response rate was 64.8%. A pilot study was conducted with a sample of 40 respondents to curtail response bias, based on which the survey questionnaires were refined. The study was conducted from June 2023 to January 2024.

Reliability and Validity Analysis
Reliability of the data collection instrument (i.e., interview schedule) was tested using SPSS 20.0 software. The reliability analysis outcome is shown in Table 1.

Validity Analysis
Two stages were used to test the instrument. The first stage comprised two English faculty members who analyzed the instrument to ensure clarity of content and accuracy of language. The second stage included a panel of experts to assess the face and content validity of the instrument. The panel of experts included seven people: two English language experts, three women entrepreneurs from selected business domains such as agricultural-related business, dairy-related business, and silk weaving units, and two academicians who had contributed earlier in questionnaire development.

Demographic Distribution: A majority (50.9%) of the respondents had completed 12th Std; one-fourth (25.9%) did not have any type of formal education; less than one-fifth (17.4%) had completed their undergraduation; and 5.7% selected 'others' as their academic qualification such as certification/training courses offered by MSME, or by any other government bodies, ITI/diploma qualification, etc. The sample shows that 42.3% of the women entrepreneurs were involved in agriculture-related business; 35.2% dairy-related business; and 22.5% weaving-related business. The results of frequency analysis shows that almost half (49.1%) of the surveyed women entrepreneurs had entrepreneurial experience of 5 to 10 years; 30.6% above 10 years; and 20.4% up to five years.

Constructs and Hypothesis
The conceptual model is verified through Structural Equation Modeling (SEM) approach using IBM AMOS 20.0 software package. The author has used SEM model to determine women entrepreneurs' attitude towards informal sources of funding and its impact on their empowerment. Hence, SEM method is used to verify the cause-and-effect relationship between women entrepreneurs' attitude towards informal sources of funding and women empowerment. It also examines the impact of the factors-related to informal sources of funding such as loan procedure and processing time, loan and interest rate, repayment schedule, flexibility in terms and conditions, and easy collection mode on the attitude formation of women entrepreneurs towards informal sources of funding. Figure 1 shows the conceptual model, which also attempts to portray the empirical relationship between women empowerment and its dimensions such as social empowerment and economic empowerment.

The following hypotheses have been framed based on the conceptual model, and it is tested through SEM approach.:

From Table 2, it is seen that the standardized coefficients of the various factors of women's attitude towards informal sources of funding are more than 0.5, which portrays the strong cause-and-effect relationship between the factors with its main construct.

Among the chosen factors, 'Loan procedures and processing time' has significant impact on women entrepreneurs' attitude towards informal sources of funding, with the highest coefficient value of 0.781, which is followed by easy collection mode (0.714), flexibility in terms and conditions (0.679), repayment schedule (0.634), and loan amount and interest rate (0.569). Therefore, the least influential factor is 'loan amount and interest rate', even though women entrepreneurs prefer informal sources of funding because they may get comparatively higher level of loan amount compared to formal sources of funding, interest rate is also high compared to formal sources.

Similarly, the factors social empowerment and economic empowerment have significant impact on empowerment of women entrepreneurs in Kanchipuram district with standardized regression coefficient of more than 0.5. However, social empowerment has comparatively more significant impact on empowerment of women entrepreneurs with coefficient value more than 0.777, which is followed by economic empowerment (0.632).

The SEM approach also explored the cause-and-effect relationship between women entrepreneurs' attitude towards informal sources of funding and their empowerment which has standardized regression coefficient of 0.372; it indicates moderate level of effect of independent variable on dependent variable. The informal source of funding has many positive factors which contribute to the formation of positive attitude of women entrepreneurs, but it also has a few major negative factors like high interest rate, lack of respect and poor treatment during non-repayment of dues as per schedule. Therefore, it does not have a strong impact on women empowerment. However, all the abovementioned relationships are positive and noteworthy at 1% level.

Table 3 represents the model fitness summary of SEM along with the value of reference range. The table shows that model fitness indices fall within the required reference range as described below:

  • From the above analysis, it is found that the chi-square/degrees of freedom index fall under the range of 3.778, where the estimated or reference range is 2 to 5, therefore, the degrees of freedom index is stated to be a good fit, according to Marsh and Hocevar (1985).
  • Likewise, it is also found that 0.168 is the significance value of the SEM model which is higher than 0.05, according to Wheaton et al. (1977), and is a good fit.
  • With respect to GFI and AGFI index fitness value, which is indicated by Hair et al. (2006) and Daire et al. (2008), there is a complete fit with values of 0.963 and 0.942, respectively.
  • Similarly, the value of Comparative Fit Index (CFI) is 0.905, which is more than the required norm of 0.90.
  • The outcome of the SEM also shows that the values of RMR and RMSEA are found to be 0.036 and 0.026, which is less than 0.08 as suggested by Hair et al. (2006).
  • Therefore, it is found that SEM proved to be a good fit. The results of the SEM model envisage the kind of relationship that happens among the selected constructs, and it is determined that women entrepreneurs' attitude towards informal sources of funding has moderate level of positive impact on empowerment of women entrepreneurs' in Kanchipuram district. The impact of women entrepreneurs' attitude towards informal sources of funding on their empowerment can be further enhanced through the state government's monitoring of informal loans given by money lenders and pawn brokers. The government can also promote the use of formal sources of loan through cooperative societies, banks, and other financial institutions, ensuring minimal procedures and documentation and quick dispersal.

Discussion
The findings of the study show that the factors loan procedure and processing time (0.781), loan amount and interest rate (0.569), repayment schedule (0.634), flexibility in terms and conditions (0.679) and easy collection mode (0.714) have significant loading on the construct with path coefficient of more than 0.5. This confirms the convergent validity of the women entrepreneurs' attitude towards informal sources of funding construct. It is also found that among the five factors of women entrepreneurs' attitude towards informal sources of funding, the factor 'loan procedure and processing time' has a significant impact with the highest coefficient value of 0.781. All the model fitness values fall within the anticipated range, therefore, the SEM analysis shows a positive impact of the abovementioned factors on women empowerment, and the model is found to be fit. The results also prove that the chosen factors that lead for the formation of attitude towards informal sources of funding certainly empower women entrepreneurs.

Conclusion
The study, conducted in Kanchipuram district, has significant implications for policymakers. Firstly, policymakers should recognize the importance of facilitating access to formal sources of funds for women entrepreneurs. To achieve this, policymakers can implement reforms aimed at reducing bureaucratic hurdles, streamlining application processes, and improving access to formal financing institutions for women entrepreneurs. This could involve providing financial literacy programs, offering incentives to formal lenders to extend credit to women-owned enterprises, and creating specialized loan products tailored to the needs of women entrepreneurs. Additionally, policymakers must address the challenges associated with informal sources of funding, including the prevalence of malpractices among lenders. By implementing regulations and oversight mechanisms, policymakers can mitigate the risks and vulnerabilities faced by women entrepreneurs when accessing informal funds. This may involve strengthening consumer protection laws, enhancing enforcement mechanisms, and promoting transparency and accountability within the informal lending sector.

Future Scope: The study's sample respondents were selected from 13 blocks located in Kanchipuram district who were involved in entrepreneurial activities related to agriculture, dairy and silk weaving units. Future studies can be stretched to other types of entrepreneurial activity carried out by women entrepreneurs, such as cotton textile, jute and jute-based, readymade garments and embroidery, paper and paper products, livestock, poultry and fisheries.

Further, the study can be extended to include male entrepreneurs from the same district, as the current study has focused only on female entrepreneurs, where a comparative analysis can be done between male and female entrepreneurs in terms of the constructs used to measure the attitude of the entrepreneurs towards informal sources of funding.

References

  1. Abdalla S A (1996), "Self-Help Groups: Their Benefits, Characteristics and Development", International Journal of Social Economics, Vol. 23, Nos. 5/6/7, pp. 75-87.
  2. Agarwal and Deepti (2001),"Empowerment of Rural Women in India", Social Welfare, Vol. 48, No. 4, p. 29.
  3. Agarwal B and Deepti P (2001), "Institutionalizing Patterns of Community-Driven Development: Evidence from West Bengal", World Development, Vol. 29, No. 1, pp. 121-139.
  4. Ahl H (2006), "Why Research on Women Entrepreneurs Needs New Directions", Entrepreneurship Theory and Practice, Vol. 30, No. 5, pp. 595-621.
  5. Ayogu Deborah U and Agu Everistus Ogadimma (2015), "Contribution of Women Entrepreneurs to Entrepreneurship Development in Nigeria: An Assessment", International Journal of Current Research and Academic Review, Vol. 3, No. 10, pp. 190-207.
  6. Charulakshmi T and Thaiyalnayaki M (2019), "Examining Challenges Encountered by Women Entrepreneurs in Kancheepuram District", International Journal of Recent Technology and Engineering (IJRTE), Vol. 7, No. 6S5, pp. 1191-1194.
  7. Cole Arthur H (1959), Business Enterprise in its Social Setting, Harvard University Press, USA.
  8. Daire H, Joseph C and Michael R M (2008), "Structural Equation Modeling: Guidelines for Determining Model Fit", Electron J. Bus. Res. Methods, Vol. 6, No. 1, pp. 53-60.
  9. Hair J F, Black W C, Babin B J et al. (2006), Multivariate Data Analysis, Pearson Prentice Hall, Upper Saddle River, NJ.
  10. Happyson Bimha, Pinninti Sridhar, Dlamini X et al. (2018), "Challenges Faced by Women Entrepreneurs in Small and Medium Enterprises in Swaziland", Indian Journal of Commerce & Management Studies, Vol. 9, No. 2, pp. 85-95.
  11. Jyoti Agarwal (2019), "Women Entrepreneurship and Innovations: Evidence from India", The International Journal of Social Science and Management, Vol. 8, No. 10, pp. 64-68.
  12. Marsh H W and Hocevar D (1985), "Application of Confirmatory Factor Analysis to the Study of Self-Concept: First- and Higher-Order Factor Models and their Invariance Across Groups", Psychological Bulletin, Vol. 97, No. 3, pp. 562-582.
  13. Metcalfe B D and Mutlag L (2011), "Women, Leadership and Development: Reappraising the Value of the Feminine in Leadership Theorizing in the Middle East", in B D Metcalfe and F Mimouni (Eds.), Leadership Development in the Middle East, pp. 328-370, Edward Elgar, Cheltenham.
  14. Narayan Deepa (Ed). (2002), Empowerment and Poverty Reduction: A Sourcebook, World Bank, Washington.
  15. Nasir S, Saeed S and Abid G (2019), "Women Entrepreneurs: New Engines of Financial Growth", Journal of Innovation & Knowledge, Vol. 4, No. 2, pp. 106-113.
  16. Raja Banik and Arundhathi Bai C (2018), "Women Empowerment Through Entrepreneurship with Special Reference to Vendors in Agartala", International Journal of Research in Social Sciences, Vol. 8, No. 1, pp. 712-719.
  17. Rashmi (2016), "Women Entrepreneur in Micro, Small and Medium Enterprises in India: An Overview", International Journal of Managerial Studies and Research (IJMSR), Vol. 4, No. 2, pp. 60-64.
  18. Subhash Chander and Arora A (2013), "Challenges Faced by Women Entrepreneurs in India", International Journal of Engineering and Management Sciences, Vol. 4, No. 1, pp. 20-25.
  19. United Nations (2001), "Empowerment of Women Throughout the Life Cycle as a Transformative Strategy for Poverty Eradication", (EGM/POV/2001/REPORT)
  20. Wheaton B, Muthen B, Alwin D F and Summers G (1977), "Assessing Reliability and Stability in Panel Models", Sociological Methodology, Vol. 8, No. 1, pp. 84-136. doi: 10.2307/270754

Reference # 26J-2023-12-04-01