Micro Units Development and Refinance Agency Limited (MUDRA) have been set up for ‘funding the unfunded’ micro enterprises in the country. MUDRA will refinance all banks. Micro-finance Institutions (MEIs) and other lending institutions, which are in the business of lending to micro / small business entities, engaged in manufacturing, trading and services activities. Thus, MUDRA will strengthen the Last Mile Financial Institutions by extending refinance and other development support to expand their outreach. This will, in turn, help micro businesses across the length and breadth of the country. MUDRA’s mandate also includes developing the micro enterprise sector into a viable economic sector, for which various development interventions including financial/business literacy programmes are planned.

PMMY loans are extended through Member Lending Institutions viz: Banks Micro Finance Institutions (MFUIs) and Non-Banking Financial Companies-MFIs (NBFC-MFIs) for an amount of upto Rs 10 lakh for income generating activities. The loans fall in three categories i.e. Shishu (upto Rs 50,000) Kishore (Rs 50,000 to Rs 5 lakh) and Tarun (Rs 5 lakh to Rs 10 lakh)

Impact on Employment:

• PMMY loans have increased the availability of credit at the bottom of the pyramid.
• They have also provided a fillip to new enterprises, thus generating employment.
• Around 90 per cent of the loans by number are from Shishu category. Their impact has been substantial on the informal business sector, thereby promoting growth and employment.
• The fact that around 55 per cent of the borrowers are from SC/ST/OBC category indicates the fulfilment of social objectives, putting the underserved first.

Ease of Borrowing:

• Borrowers particularly value three attributes of PMMY namely, the lack of requirement for a guarantor or collateral, the simple documentation and quick processing.
• PMMY loans have been instrument in extending loans to women and expanding their participation in the labour market.

Beyond the Money: Creating a Positive Lending Ecosystem

PMMY’S ground-breaking contribution lies in the changes it has brought about in the formalisation of the eco system for such loans, thus acting as a catalyst for employment generation.

This has happened because of the following elements:

• Portfolio Credit Guarantee: For PMMY loans, a Portfolio Credit Guarantee has been introduced, with 50 per cent loss coverage
• Refinance: Refinance from Mudra Ltd for PMMY comes at low rates, with caps on lending rates, in effect reducing interest rates to the borrowers.
• Mudra Card: It is Rupay Debit Card which is an innovative credit product providing the facility of working capital I the form of cash credit/overdraft and can be used for drawing cash from ATMs or BCs or make purchase using PoS machine even on holidays and beyond banking hours. No interest rate is charged for amounts borrowed and deposited the same day
• Credit Histories: Loans disbursed under PMMY are captured by credit bureaus which help formalise which entrepreneurs, enhancing employment.

• Catalysing Change in MFI space: PMMY’s architecture, through refinance and credit guarantee which is performance linked, in effect rewards and promotes better MFIs.
• Loans, not Grants: All customers are borrowers and not beneficiaries under PMMY. With recovery being inbuilt in the loan, with no subsidies, disciplined borrowing and lending is ensured, leading to a positive eco system creating “Mudrapreneurs”

Linking with Value Chains:

• The extension of the Financial Inclusion programme through the Jan Dhan Aadhaar Mobile (JAM) Trinity, has created an enabling infrastructure in extending institutional credit to a substantial number of borrowers through PMMY
• With the emergence of new and innovative solutions like Fintech, the contours of contactless lending have been outlined. The interconnections among various data collection points viz; Trade Receivables Discounting System (TReDS), Government e-Marketplace (GeM), GST IT Returns etc can, in turn, formalize and ensure ease of borrowing.
• PMMY has played a significant role in formalizing the informal and funding the unfunded.
• The Global Findex Report released by the World Bank earlier this year, revealed that the number of account holders have risen from 35 per cent of the adults in 2011 and 53 per cent in 2014 to 80 per cent in 2017 among MUDRA loan beneficiaries, women account for almost 75 pe cent (World Bank, 2018).
• MUDRA MITRA is a mobile phone application providing information regarding ‘Micro Units Development and Refinance, Agency Ltd (MUDRA) and its various products/ schemes. It will guide a loan seeker to approach a Banker in availing MUDRA loan under Pradhan Mantri Mudra Yojana (PMMY) Users can also access useful loan related material including sample loan application forms.