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Mudra Encouraging “Inclusive” Indian Entrepreneurship

  • The Pradhan Mantri Mudra Yojana (PMMY) in India recently celebrated eight years since its successful launch.
    • The yojana has actually made a significant contribution to the inclusion of several communities that have historically had low rates of entrepreneurship.


GS Paper-2: Government Policies and Interventions for Development in various sectors and Issues arising out of their Design and Implementation.

Mains Question

“The PM Mudra Yojana has greatly aided the inclusion of several communities that have historically had low entrepreneur representation.” Evaluate. (250 Words).

Important Points:

  • The PMMY is one of the Union government’s flagship programmes to promote self-employment.
  • The preamble of the Indian constitution makes explicit reference to equality of status and opportunity as a fundamental principle.
  • A more diversified group of entrepreneurs will also result in the removal of any barriers or any form of discrimination on any dimension of candidates, improving the labour market. o Ensuring equal opportunity is ethically and morally just for any society – but it also brings with it several economic benefits as it makes the work environment more empathetic, empowering, and collaborative.

How did the MUDRA Scheme come to be?

  • The nation’s official or institutional architecture was unable to connect with them or provide for their financial needs.
  • The Indian banking system is typically risk-averse and frequently imposes formal requirements, such as the need for collateral or regular wage employment, which has made it difficult for many members of the poor and marginalised communities to access formal sources of credit to raise their standard of living.
    • This system stifled thousands of entrepreneurs’ desire to take calculated risks as well as innovation and creative destruction.
  • The ability to obtain capital, which can then be used for productive purposes by fusing other production factors, is the essence of any business.
    • Members of marginalised communities, particularly those who are economically underprivileged, frequently struggle to cover unexpected costs or make discretionary purchases.
  • The underrepresentation of women, SC, ST, and OBC communities among Indian entrepreneurs was acknowledged by the government.
    • The ability of their future generations to engage in such activities may be hampered by their limited participation in entrepreneurship today.
  • Therefore, it was crucial to support those from these communities who wanted to start their own businesses while also ensuring that they had access to equal opportunities.
  • With these issues in mind, the PMMY was floated with the goal of creating an easily accessible bridge between a sizable unbanked sector and formal lenders. In addition, a lack of female entrepreneurs typically results in the workplace environment being governed by policies that may not be conducive enough for female participation in the workforce.

PM Mudra Scheme

  • Launched in 2015, the PM MUDRA Scheme (PMMY) enables Member Lending Institutions (MLIs), which include Scheduled Commercial Banks (SCBs), Regional Rural Banks (RRBs), Non-Banking Financial Companies (NBFCs), and Micro Finance Institutions (MFIs), to offer collateral-free institutional credit up to 10 lakh.
  • The Micro Units Development and Refinance Agency (MUDRA), which operates under the auspices of the PMMY, developed three sub-schemes under the names Shishu (for loans up to 50,000), Kishore (for loans between 50,001 and 5 lakh), and Tarun (for loans between 500,001 and 10 lakh).
    • The names Shishu, Kishore, and Tarun also represent the micro unit beneficiary’s stage of growth or development and its funding requirements.
  • Anyone who has a business plan for a small business enterprise and is otherwise qualified to borrow money may apply for credit under the programme.The programme has undergone numerous changes since it was first introduced.
  • However, since 2016-17, activities allied with agriculture and their support services promoting livelihoods have been brought under its ambit. Since 2017-18, loans have been sanctioned for the purchase of tractors and power tillers. And from 2018-19, loans to buy two-wheelers for commercial purposes have also been included. o Initially, the PMMY covered income-generating activity only in the sectors of manufacturing, trading, and services.

What benefits has the mudra yojana provided?

  • Social Justice through Inclusivity: o Women entrepreneurs owned about 68% of the Mudra accounts under the programme.
    • A total of 51% of Mudra accounts fall under the SC/ST and OBC categories.
    • The programme has been successful in meeting the needs of minorities.
  • Loans to people from underrepresented groups reached an all-time high in 2022, with a 10% overall share.
  • Therefore, from the perspective of representation, the programme specifically aimed to motivate underrepresented communities to apply for these collateral-free loans in an effort to enhance their economic prospects.
  • Higher Disbursement: The total disbursement under the scheme increased by an average of 33% over the course of its first three years, demonstrating the success of its differentiating feature.
  • According to data as of 24 March 2023, the scheme has disbursed a total of 22.65 trillion yen.
  • Shishu loans account for 40% of all loans, which indicates that the PMMY has primarily aided new business owners.
  • Economic Impact: o According to survey findings from the ministry of labour and employment, the programme contributed to the creation of 11.2 million net new jobs from 2015 to 2018.
  • Geographical Coverage: o The PMMY is a national programme, so from the perspective of balanced economic growth, spatial dispersion is a crucial factor.
  • One goal of India’s growth strategy has been to close the gap between the economically successful west and the struggling east.
    • States like Uttar Pradesh, Odisha, and Bihar have seen gains across the board thanks to the PMMY.
  • Indicating a flow of beneficiaries eastward, West Bengal and Tripura have also seen increases in their total shares (as well as in the Kishore and Tarun categories).
  • Even though they dominate the scheme in absolute terms, developed areas like the national capital region, Maharashtra, Karnataka, and Goa have seen their shares decline.
  • Overall, the PMMY has achieved its goals of equitable and fair spatial distribution of benefits.

Way Forward:

  • While Mudra cards continue to gain popularity, it is crucial that the PMMY benefits from e-commerce and 5G technology in the upcoming years.
  • Another way to advance this plan would be to promote the formalisation and registration of own-account businesses.
  • Mudra addressed a significant barrier to the Indian economy, particularly for MSMEs who frequently had difficulty obtaining structured financing to start businesses.
  • In many ways, Mudra was the first step in opening Indian banks’ doors to the country as a whole. The government’s support of these loans ensured that the scheme secured the unsecured, allowing banks to serve the unbanked.


The MUDRA programme aims to be a catalyst for change that transforms the microbusinesses in this country into effective engines of employment and GDP growth.

February 2024