The Indian Prime Minister Narendra Modi has a policy that is aimed at helping the nation accelerate its economic growth and development. From this policy, Jan Dhan Yojana was realized and from its objective, the Prime Minister pioneered the launch of MUDRA Bank. MUDRA stands for Micro-Units Development and Refinance agency and it was founded on 8th April 2015. This financing initiative intends to facilitate micro units acquire loans and ensure they have sufficient funds to grow and develop. Small businesses are the backbone of India’s economy; however, they face many challenges. For example, they are unable to secure loans from typical banks because they don’t have the collateral or the financial muscle to pay off the loan interest rates. Considering that there are over 5.77 crore small business entities running in India, Narendra Modi feels that if these businesses are helped to grow, it would help turn around the Indian economy by increasing growth. So, although MUDRA isn’t a fully-fledged bank, it operates under a scheme that aims at improving the financial well-being of small entities and allowing them to compete with other established businesses.
MUDRA Loan Yojana Objectives:
The MUDRA Loan Yojana scheme has been created with various objectives and they include:
- To develop policy guidelines that help determine how micro and small enterprises are financed
- To have all microfinance institutions and businesses registered and regulated
- Help micro entities to grow and develop further
- Help lower income groups to set up and develop their businesses
- Set up sound financial practices that aim at preventing over borrowing by the lower income business persons or entrepreneurs
- Create a roadmap for the unbanked to easily access finance and reduce the cost of financing
- Have the preference in lending given to SC/ST
- Regulate the microfinance institutions that deal with service, manufacturing, and trading
MUDRA Yojana allows all small business entities and enterprises needing finance to be able to access it. This means all small businesses are eligible for funds or a loan.
MUDRA Loan Scheme Categories:
MUDRA helps refinance the micro institutions through three stages:
- Shishu: In this refinancing stage, MUDRA offers loans to small businesses up to RS.50, 000
- Kishor: In this scheme, small businesses can get loans from RS.50, 000 to Rs.5 Lakh
- Tarun: In this stage, small institutions can get loans that range from Rs.5 Lakh to Rs.10 Lakh.
Features of the Mudra Scheme:
The MUDRA scheme for women has some inherent features. Women are bringing up and taking a leading position in business by setting up and running businesses like tailoring units, beauty parlors, tuition centers, among other small entities. Women who form a group to set up a joint venture are also able to benefit from the MUDRA Yojana scheme. Forming business ventures as groups bring in many benefits because the individuals can share their business idea, experiences, and support each where there are weaknesses. Eligible loan applicants need to provide the required details and information and the loan processing procedure is pretty simple. The verified female citizens, once they apply for the loan and are approved, they are issued a MUDRA card to purchase the materials or items they need to set up their business. The women also get loan facilities under various schemes like Shishu, Kishor, and Tarun. The procedure is just the same as for the rest of the applicants.