Impact Assessment of Pradhan Mantri Mudra Yojana

Syllabus: Government Policies and Interventions

Source: Niti Aayog

Key Findings of the PM Mudra Yojana Report:

• Overall Performance: Since 2015, the scheme has supported 35 crore Micro and Small entrepreneur accounts.

• Financial Inclusion: Women hold around 71% of the accounts (FY 2022). Sanctioned amounts for new entrepreneurs have increased.

• Support for Small Businesses: 80% of loan accounts are in the Shishu category (FY 2021).

• Regional Variation: The Northeast region has the lowest and decreasing number of accounts and sanctioned amounts.

Other Achievements of PM Mudra Yojana:

• Loan sanctioned: About ₹23 lakh crore has been sanctioned in nearly 41 crore loan accounts 30 crore MUDRA Yojana loans have been given to women entrepreneurs

• 30 crore MUDRA Yojana loans have been given to women entrepreneurs

• Inclusive growth: About 69% of accounts under the scheme belong to women entrepreneurs and 51% of accounts belong to entrepreneurs of SC/ST and OBC categories

• Easy availability of credit to budding entrepreneurs: Approximately 21% of the total loans have been sanctioned to New Entrepreneurs.

• Employment Generation: As per a survey conducted by the Ministry of Labour and Employment, PMMY helped generate over 1 crore net additional employment from 2015 to 2018, out of which women accounted for 69 lakh (62%)

Feature of the scheme

Features | Description

Full name | Mudra – Micro Units Development & Refinance Agency Ltd

Launch Year | 2015

Ministry | Department of Financial Services, Ministry of Finance

Aim | Providing loans up to Rs. 10 lakh to non-corporate, non-farm small/micro-enterprises

Three pillars of the scheme | 1. Banking the Unbanked 2. Securing the Unsecured 3. Funding the Unfunded

Funding Provision | MUDRA, a financial institution set up by the government, provides funding to the small business sector through institutions like Scheduled commercial banks, NBFCs, and MFIs. MUDRA is a refinancing Institution. MUDRA does not lend directly to micro-entrepreneurs / individuals.

Loan Products | 1. Shishu (up to Rs. 50,000) 2. Kishore (above Rs. 50,000 and up to Rs. 5 lakh) 3. Tarun (above Rs. 5 lakh and up to Rs. 10 lakh)

Collateral | Loans under this scheme are collateral-free loans

Target Beneficiaries | Disadvantaged sections of society such as women entrepreneurs, SC/ST/OBC borrowers, minority community borrowers, and new entrepreneurs

Products and Services | Loans can be used for income-generating activities in the manufacturing, trading, services sector, and agriculture

Expansion | PMMY has been expanded over time to cover activities related to agriculture, such as fishing, dairy, and food processing, and loans for tractors and power tillers, and two-wheelers for commercial use were included in PMMY

Steps taken to improve the scheme | udyamimitra portal (for online applications); End-to-end digital lending for automated sanctions under PMMY (by some banks); Nomination of Mudra Nodal Officers in PSBs; Interest Subvention of 2% on prompt repayment of Shishu loans

2. Securing the Unsecured

1.Funding the Unfunded

MUDRA is a refinancing Institution. MUDRA does not lend directly to micro-entrepreneurs / individuals.

1.Kishore (above Rs. 50,000 and up to Rs. 5 lakh)

1.Tarun (above Rs. 5 lakh and up to Rs. 10 lakh)

Challenges faced by the scheme:

• High non-performing assets or bad loans

• Limited funds that cannot keep up with the pace of demand

• Regional disparities in the distribution of benefits

• Lack of financial literacy among beneficiaries leading to defaults

• Limited outreach to rural entrepreneurs

• Collateral requirements for loans above a certain amount make it difficult for many small enterprises to access credit

• Loan size limitations of up to Rs. 10 lakhs, which is inadequate for many small enterprises with higher capital requirements.

Key Recommendations:

• Implement a portal for real-time beneficiary data upload.

• Increase digitization, including chatbot use for query resolution.

• Establish a recognition system for Micro Lending Institutions based on their scale and performance.

Conclusion:

Overall, the MUDRA scheme has been successful in providing credit to small entrepreneurs. However, it faces some significant challenges that need to be addressed to make it more effective and inclusive.

Insta Links

Pradhan Mantri MUDRA Yojana

Mains Links

What are the objectives of the Pradhan Mantri Mudra Yojana (PMMY)? Should the success of PMMY be measured in terms of the quantum of loans disbursed? Comment. (15M)

Prelims Links

Pradhan Mantri MUDRA Yojana is aimed at ( UPSC 2016)

(a) bringing small entrepreneurs into the formal financial system (b) providing loans to poor farmers for cultivating particular crops (c) providing pensions to old and destitute persons (d) funding the voluntary organizations involved in the promotion of skill development and employment generation

Ans: A