Urban unincorporated enterprises in India face greater difficulty accessing credit than their rural counterparts, while manufacturing units, women proprietors and entrepreneurs from Scheduled Caste, Scheduled Tribe and Other Backward Classes also remain more vulnerable to credit constraints, according to a recently released study by NIPFP based on government data.
The analysis by Shivani Badola and Sacchidananda Mukherjee found nearly two-thirds of informal enterprises face some form of credit constraint, underlining the continuing difficulty small businesses face in accessing finance.
The assessment found that female proprietors have a 4 percentage-point higher probability of being fully credit-constrained and a 0.70 percentage-point higher probability of being partially credit-constrained, holding other factors constant.
The proportion of women-led manufacturing firms rose from 58 percent in 2024 to nearly 60 percent in 2025, indicating a growing role in ownership and management.
Entrepreneurs belonging to SC/ST and OBC categories were also found to be more likely to face full or partial credit constraints compared with entrepreneurs from other caste categories.
This comes at a time when number of female-led enterprises have been expanding.
The regional divide is also significant. Around 69 percent of urban enterprises are either fully or partially credit-constrained. In comparison, 62 percent of rural enterprises face similar constraints, while 38 percent of rural enterprises are not credit-constrained.
Manufacturing faces the sharpest squeeze
The sectoral split shows that manufacturing enterprises face the highest degree of credit stress and why increasing the share of manufacturing may be a problem.
Around 53.64 percent of manufacturing enterprises are fully credit-constrained, while 27.55 percent are partially constrained. On the other hand, around 40.83 percent of trading enterprises are fully credit-constrained In contrast, the services sector appears better placed, with 55.20 percent of service-sector enterprises not facing credit constraints.
Smaller firms more vulnerable
The assessment also found that enterprise size plays an important role in determining access to credit. Smaller firms, which often have lower turnover and limited assets, face greater difficulty in securing credit.
Profitability also matters. Enterprises with higher price-cost margins, used as a proxy for profitability or market power, were less likely to be credit-constrained. A one-unit increase in the price-cost margin was associated with a 7 percentage-point decline in the probability of being fully credit-constrained and a 10.6 percentage-point decline in the probability of being partially constrained.
GST filings help
The findings suggest that formalisation helps enterprises access credit.
Firms registered under GST or VAT were less likely to be fully or partially credit-constrained. Enterprises with bank accounts and those maintaining books of account were also less likely to face credit constraints.
