India is set to top the Rs 2,00,000 crore mark in loans offered to millions of small and tiny enterprises in 2017-18 under the Pradhan Mantri Mudra Yojana (PMMY), a flagship refinance scheme that Modi-government launched in 2015.
Nearly four million small entrepreneurs, involved in diverse businesses ranging from neighbourhood grocery stores to micro dairy units and carpentry services, availed loans up to Rs 10 lakh in 2016-17 through the scheme.
A majority of these loans were given in opposition-ruled states including West Bengal and Tamil Nadu, a sign that one of NDA government’s signature financial inclusion plans have cut across political lines to aid cash-starved micro entrepreneurs.
“During the first two years of its operations, the targets set by the government have been achieved,” said Jiji Mammen, Managing Director-Chief Executive Officer, MUDRA.
Mudra loan disbursals in 2015-16 stood at Rs 1.37 lakh crore, 12 per cent higher than the budgeted target of Rs 1.22 lakh crore. In 2016-17, Rs 1.81 lakh crore loans were given out against a target of Rs 1.8 lakh crore.
“Encouraged by the success of the scheme, the government has set a higher target of Rs 2.44 lakh crore for the current FY18. Banks including Regional Rural Banks and Urban Cooperative Banks, MFIs, NBFCs, etc. are geared up to achieve the set targets,” Mammen said.
Mudra was launched in 2015 through which government extends loans through banks, non-banking financial companies (NBFCs) and micro-finance institutions (MFIs) to small and tiny enterprises. The scheme is part of the government’s broad plan to make reasonably priced small-ticket loans to micro enterprises that otherwise conventional banks overlook.
Loans are clubbed into three categories—Shishu (up to Rs 50,000), Kishor (Rs 50,000 to Rs 5 lakh) and the Tarun (Rs 5-10 lakh).
A Moneycontrol analysis showed that more than 7 out of 10 loans (71 percent) of all Mudra loans since April 2015 were concentrated in 10 states—Tamil Nadu, Karnataka, Maharashtra, Uttar Pradesh, West Bengal, Madhya Pradesh, Bihar, Odisha, Gujarat and Assam.
These states (on the basis of number of accounts financed) received loans to the tune of Rs 96,589.81 crore in 2015-16, accounting for more than 72 per cent of the total, and 71 percent of the total in 2016-17.
Six of top 10 (including Uttar Pradesh ruled by Samajwadi Party until March 2017) were opposition-ruled states.
With a total loan disbursal of Rs 17,756 crore in 2016-17 and Rs 15,497 crore in the previous year, AIADMK-ruled Tamil Nadu has been the scheme’s topmost beneficiary so far.
Small entrepreneurs from Trinamool Congress’s Mamta Banerjee-led West Bengal received Mudra loans worth Rs 15,480.03 crore in 2016-17, a growth of 100 percent over the previous year’s Rs 7,740.41 crore. The number of beneficiaries in the eastern state also nearly doubled to 4.6 million in 2016-17 from 2.6 million in 2015-16.
JDU-RJD-Cong-ruled Bihar received Mudra loans worth Rs 11,585.63 crore in 2016-17, jumping 59.45 percent from Rs 7,265.91 crore in 2015-16. The number of Mudra loan beneficiaries also jumped 50 per cent to 3.7 million in 2016-17 from 2.5 million in the previous year.
Among all state, government data shows, the largest number of small firms were in West Bengal, accounting for 11.08 per cent all micro, small and medium enterprises (MSMEs) registered in the country, followed by UP, Maharashtra and Tamil Nadu with 11.55 per cent, 10.05 per cent and 7.24 per cent, respectively.
Mammen said that the government has not yet carried out an industry-wise classification of MUDRA loans.
Santosh Gangwar, Minister of State for Finance, told Parliament that as on July 7 this year 81.9 million individuals, including 62 million women have availed Mudra loans. “Of this, 2.46 crore (24.6 million) are new entrepreneurs,” Gangwar said in a written reply to the Rajya Sabha on July 18.
“While Government has not undertaken any impact assessment study of the scheme, an independent assessment of PMMY was undertaken by ‘MicroSave’, a financial inclusion consulting firm and the findings, inter-alia, indicate that borrowers value three attributes of PMMY, namely no requirement of a guarantor or collateral, simple documentation and quick processing, proactive approach of banks in identifying and disbursing loans to first timers, Mudra loans helping to enhance scope and profit of business etc,” Gangwar said.
According to the MicroSave survey carried out in July last year, banks’ Mudra portfolio comprises largely (93 per cent) of small shop-owners, eateries, vendors, carpenters, furniture sellers, and mechanics. In contrast, NBFC-MFIs’ end-use of MUDRA loans is hard to track and monitor.
The study indicates that 3 per cent of Mudra loans disbursed by NBFC-MFIs have been used for non-business, personal needs, such as house repairs or construction and weddings. Similarly, 10 per cent of MUDRA loans disbursed by NBFC-MFIs have found to be used for agriculture.
“Services sector is growing more,” said Anil Bhardwaj, secretary general, Federation of Indian Micro, Small and Medium Enterprises (FISME). “Service providers don’t feel global competition and therefore they are better positioned”.