Credit concentration and the missing pathway: Institutional architecture and women's MSME graduation in West Bengal

Abstract

West Bengal holds the largest share of women owned proprietary MSMEs of any Indian state, yet its formal MSME credit architecture between 2017-18 and 2022-23 has grown sharply concentrated. This paper analyzes three agency disaggregated credit datasets, covering MSME Ground Level Credit flow, Pradhan Mantri Mudra Yojana loan disbursement, and Stand Up India credit to women, to show that Regional Rural Banks and Cooperative Banks, the institutions structurally closest to rural women transitioning out of Self Help Group and Joint Liability Group microfinance, have become nearly absent from formal women's enterprise finance. Herfindahl Hirschman Index analysis confirms rising concentration, from 8,337 to 9,540 over six years, while disproportionality ratios show that Cooperative Banks disbursed zero Stand Up India loans to women across 27 eligible branches, and that Regional Rural Banks reached only 7.6 percent of their own branches. Within Mudra lending, loans routed through the channel most accessible to women, non bank microfinance institutions, average half the ticket size of loans through commercial banks. Together these findings indicate that the credit architecture itself, not scheme design or credit scarcity, constitutes a structural barrier at the transition from sub MSME to MSME credit for women entrepreneurs. Three institutional reforms are proposed, targeting Cooperative Bank capacity building, a Regional Rural Bank specific graduation product, and a review of Mudra underwriting conservatism within the microfinance institution channel.