- Describe the benefits accrued from the MUDRA loans.
The MUDRA (Micro Units Development and Refinance Agency Ltd) loans have changed the landscape of financial inclusion by reversing the culture of exclusion of those at the fringe and at the bottom of the pyramid. It has also opened a new promise for India’s entrepreneurial spirit.
Success story: The MUDRA scheme was launched in April 2015. Since then the banks, including RRBs, NBFCs, MFIs, together have disbursed Rs. 35.32 crore loans amounting to around Rs. 18.4 lakh crore, translating into an average loan of Rs. 52,000 for the smallest borrowers. Around 2/3rd of these loans are sanctioned to women entrepreneurs.
It has created employment opportunities to more than 10 crore individuals, according to a conservative estimate. The philosophy behind creating the 3 category of MUDRA loans – Shishu, Tarun and Kishor – was that over time, a Shishu loanee will grow into a Tarun loanee, and from thereon will turn into a Kishor loanee, thus ensuring prosperity along with equity. For this, the government promoted entrepreneurship through a clean model of scale.
The creation of Credit Guarantee Fund for Micro Units, ensured that banks and other financial intermediaries became confident about loan acceptance and disbursals. Loans up to Rs. 10 lakh enjoys a guarantee from the federal government-sponsored trust. New opportunities are being created with NBFCs and MFIs joining hands with Banks to give loans. It has too given additional window to the lenders to lend without any collateral security. Thus ordinary citizens could access formal credit seamlessly.
Technology has been used to deliver and monitor the process, revolutionizing our financial systems. Banking Correspondents were roped in to promote wider acceptance of the scheme. Also, it has generated many fascinating success stories of women empowerment through MUDRA loans (women beneficiaries account for 2/3rd of the MUDRA loanees) – many women borrowers have established themselves at the forefront of livelihood support for their families. They have freed themselves from the perennial bondage of informal money-lenders.
So, a multiplier effect is in play with social security embedded for borrowers and their families.
Going forward, various government welfare schemes and promotional schemes in agriculture and MSMEs could be better integrated with the MUDRA scheme, so as to better utilize the fin-tech and start-up ecosystem in the country. MUDRA is a success story that shows how the right political intent can meet socio-economic-cultural forces for a multiplier effect on the change in the financial ecosystem that is sustainable and equitable.