Building bridges to equitable prosperity
RIGHT from its early days, the Modi government has wanted to essentially change the exclusion culture that was surreptitiously built in the six decades after Independence: excluding those at the fringe and at the bottom of the pyramid. It made the new policy-makers restless in their quest for equitable entrepreneurial development in every nook and corner of our vast country. In this regard, two schemes — PM Jan Dhan Yojana and MUDRA (Micro Units Development and Refinance Agency Ltd) loans — have changed the landscape of financial inclusion, both deposit and lending, in this country with the promise of a new independence of India’s entrepreneurial spirit.
The Mudra scheme was launched in April 2015. In the past seven years, banks (including regional rural banks or RRBs)/NBFCs/MFIs have together disbursed Rs 35.32-crore MUDRA loans for an amount totalling around Rs 18.4 lakh crore, translating into an average loan of Rs 52,000 for the smallest of borrowers. Around two-third of these loans are sanctioned to Women entrepreneurs. Assuming that each unit employs a minimum two persons, on a conservative basis, these units are providing employment to in excess of 10 crore individuals.
The government, aware of the varied needs of those a little short in financial understanding but rich with business acumen and dreams to make it big, created three categories of MUDRA loans to take care of different categories of entrepreneurs exclusively, Shishu, Tarun and Kishor. The guiding philosophy was that over time, a Shishu loanee will not remain in the Shishu category forever, it will grow into a Tarun, a Tarun will become a Kishor with time and so forth, ensuring equity and prosperity.
However, the government had to overcome many challenges post 2014. There was no enabling system in place. No architecture or infrastructure to anchor the humongous volumes proposed. The government disciplined the prevailing culture by building an atmosphere of trust that was mutual. The government was promoting entrepreneurship through a clean model and on such a colossal scale that was never tried before. There were opportunities for growth and income generation but the people who were on the margins were not sure whether their spirit of entrepreneurship would receive enthusiastic support from the banking system.
The creation of a guarantee trust (Credit Guarantee Fund for Micro Units or CGFMU) by the government ensured that banks and other financial intermediaries became confident about loan acceptance and disbursals. Loans up to Rs 10 lakh now enjoy a guarantee from the federal government-sponsored Trust. Lenders have the additional comfort to lend without asking for any other collateral security. Soon this became an all-encompassing phenomenon whereby ordinary citizens of this country found the portals of big financial entities open for them seamlessly.
The government also used technology to deliver and monitor the process. Banking correspondents were roped in to promote wider acceptance of the scheme and to make people familiar with the scheme particulars and nitty-gritty.
There are many fascinating success stories of empowerment of people through the MUDRA scheme. Many such stories are of women borrowers who have established themselves at the forefront of livelihood support to their families and even provided employment to other families. They have freed themselves from the perennial bondage of informal money-lenders and have scaled up with finance from banks. Women beneficiaries account for two-third of MUDRA loanees, many of them coming from socially disadvantaged groups, changing the socio-cultural fabric of the country.
These success stories remind us that micro business through hardships, turmoil and challenges can only grow bigger. No challenge could break their indomitable spirit and resilience.
The country also witnessed the resolute spirit of entrepreneurial India during the Covid phase. Some learned people said that there would be great stress in the system, the sticky loans will grow manifold. But, to their dismay, the system was strong enough to come through unscathed. The government kept the pledge to support this fearless new breed of business class intact. The government also introduced a 2 per cent interest subvention scheme to lessen the burden of borrowers to a great extent that continues till today.
A new digital India has been unfolding, revolutionising our financial systems. Today, India has a streamlined system that helps a person use a bank’s app to apply for a loan from the comfort of his/her home. New opportunities are being created, with NBFCs and micro finance institutions joining hands with banks/RRBs to dole out MUDRA loans. Corporates are finding new supply chains. There is a multiplier effect in play — one rupee of credit given is making much more in the circular economy. There is social security embedded for the borrowers and their families that was never thought of before. Going forward, various government welfare schemes and promotional schemes in agriculture and MSMEs could be better integrated with the MUDRA scheme, as also better usage of fin-tech and start-up ecosystem to bring forth an immersive, 360-degree development perspective that transcends boundaries.
MUDRA is a success story that just goes on to show how right political intent can meet socio-economic-cultural forces for a multiplier effect on change that is sustainable and equitable. We believe that this is just the beginning of Amrit Kaal for an entrepreneurial India that believes in itself.
Views are personal
