How Helpful Have Been Mudra Loans?

By: Yash Gupte

The war-of-words began between the two soon after the congress leader P. Chidambaram took to twitter to tweet about the failures of the scheme to which former chief economic advisor K. V. Subramanian replied with a series of tweets filled with the success of scheme.

Mudra loans have triggered a Twitter war of words between former finance minister and Congress leader P. Chidambaram and former chief economic advisor K. V. Subramanian. While the former has dismissed Mudra loans as a waste of money, the later has responded with a long Twitter thread with data and research studies to demonstrate how useful the Mudra loans have been, especially for women. The war-of-words began between the two soon after the congress leader P. Chidambaram took to twitter to tweet about the failures of the scheme to which former chief economic advisor K. V. Subramanian replied with a series of tweets filled with the success of scheme. Considering the difference of facts and opinion between the two, India Tracker takes a look at the performance of the Mudra Scheme right from its launch.

The MUDRA scheme was introduced by the government in 2015 to offer small and microbusinesses that are neither corporations nor farms loans of up to Rs 10 lakh. Micro Units Development & Refinance Agency Ltd or MUDRA, is a financial institution established by the government. Through a variety of last-mile financial institutions, including banks, non-banking financial companies (NBFCs), and micro finance institutions (MFIs), it finances the non-corporate small business sector. MUDRA has created three products i.e. 'Shishu' (loans up to Rs 50,000), 'Kishore' (loans from Rs 50,000 to Rs 5,00,000)  and ‘Tarun’ (loans from Rs 5,00,000 to Rs 10,00,0000) as per the stage of growth and funding needs of the beneficiary micro unit. The loans provided under this scheme are collateral free loans.

Source: www.mudra.org.in

The chart shows that all the targets set by the government under the MUDRA scheme were achieved except for the year 2020-21. Data show that the overall effectiveness of the programme implemented by all lending institutions decreased by 5% over the previous year. This is primarily because NBFCs and SFBs made relatively few disbursements during FY 2020–2021. Apart from the achievements of targets, there was a decrease in the number of accounts in 2020-21 as compared to 2019-20.

Source: www.mudra.org.in

Among the three categories, Shishu loans had the largest share of 79% in terms of number of accounts and 34% in terms of value. However, Shishu Loans sanction reduced by 33% over last year. The reason behind this has been attributed to the covid-19 pandemic. The number of Kishor loans accounts registered an increase from 64,71,873 accounts in 2019-20 to 94,86,160 accounts in 2020-21. There was a decrease in the number of Tarun loan accounts from 12,85,116 in 2019-20 to 10,68,771 in 2020-21. The total number of loan accounts dropped from 6,22,47,606 in 2019-20 to 5,07,35,046 in 2020-21.

Source: www.mudra.org.in

Out of the total amount sanctioned, 41% went to the women borrowers. Women held 66% of the accounts in the Shishu category, and they were authorized to receive 69% of the funds. The MFI’s preference for extending microloans to women is the cause of the high proportion of women in the Shishu group. The data shows that the women have benefited maximum through the MUDRA scheme as this has helped them to expand their business. Apart from the Shishu category, the Kishor loan category also witnessed high participation of women.

Therefore, as the data shows, the MUDRA scheme has helped a number of people in expanding their business by allowing them access to easy loans.