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It’s been over eight years since the launch of MUDRA, and recently, NITI Aayog released a report titled ‘Impact Assessment of PMMY’, shedding light on the scheme’s performance and its influence on micro-entrepreneurs. Data indicates that the share of accounts under the Shishu category dropped to its lowest in 2023-24, comprising just 62% of total beneficiary accounts, down from 93% in 2015-16. In contrast, the Kishore category saw a significant rise, with its share increasing from 6% to 35% over the same period.
Touted as a significant milestone in advancing financial inclusion in India, the Government of India launched the Micro Units Development & Refinance Agency (MUDRA) and the Pradhan Mantri Mudra Yojana (PMMY) in 2015, with a vision to empower millions of micro-entrepreneurs by providing them access to formal credit, addressing a long-standing challenge of the micro-enterprise sector, which often relies on informal loans or limited personal resources. By enhancing access to institutional finance, MUDRA seeks to transform these enterprises into drivers of economic growth and job creation, aligning with the government’s vision of ‘funding the unfunded’ micro-entrepreneurs.
It’s been over eight years since the launch of MUDRA, and recently, NITI Aayog released a report titled ‘Impact Assessment of PMMY’, shedding light on the scheme’s performance and its influence on micro-entrepreneurs. In today’s story, we delve into the key takeaways from the report and evaluate the effectiveness of the PMMY initiative so far.
Numer of Accounts & Disbursements improved since its inception
The MUDRA scheme provides loans to income-generating micro-enterprises involved in manufacturing, trading, agriculture and services, with a maximum loan limit of Rs. 10 lakhs. To meet the funding needs of borrowers, loans can be obtained from banks, Non-Banking Financial Companies (NBFCs), and Microfinance Institutions (MFIs). The scheme offers loans across three categories: ‘Shishu’, for loans up to Rs. 50,000; ‘Kishore’, for loans from Rs. 50,001 to Rs. 5 Lakh; and ‘Tarun’, for loans from Rs. 5 Lakh to Rs. 10 Lakh.
Since its launch until 2024-25 (August), the MUDRA scheme has extended its reach to 49.5 crore borrower accounts, providing credit support amounting to Rs. 29.76 lakh crore. While the average growth rate in disbursements was 33% before 2019-20, it slowed to just 2% during the COVID-19 pandemic years (2019-20 to 2021-22). However, 2022-23 saw a significant rebound with a 36% increase in the disbursed amount, followed by 18% during 2023-24. Notably, this period also recorded the highest number of accounts reached—668 lakh—slightly surpassing the 623 lakh accounts in 2022-23.
Shishu Accounts Hit Lowest Share in 2023-24
The category-wise analysis of MUDRA accounts and disbursements shows that till 2023-24, Shishu loans make up 80% of the total accounts, Kishore accounts for 18%, and Tarun constitutes 2%. However, in terms of the total amount disbursed, Shishu and Kishore account for 38% each and Tarun account for 23%.
A year-on-year analysis reveals that the share of accounts under the Shishu category dropped to its lowest in 2023-24, comprising just 62% of total beneficiary accounts, down from 93% in 2015-16. In contrast, the Kishore category saw a significant rise, with its share increasing from 6% to 35% over the same period. The post-pandemic years, particularly 2022-23 and 2023-24, have witnessed a shift in the composition of MUDRA accounts, reflecting changing financial needs.
In terms of loan disbursements, the share of Shishu loans decreased from 47% to 28%, while Kishore loans grew from 31% to 48% between 2015-16 and 2022-23. Meanwhile, disbursements under the Tarun category have remained relatively stable at 23%.
Average Loan Size Increases for Shishu & Tarun Categories, Declines for Kishore
Analysis of the average loan size disbursed to micro-entrepreneurs and the trends observed since the scheme’s launch reveals that from 2015 onwards, the average loan size for Shishu accounts has steadily increased, with exceptions of 2019-20 & 2020-21, rising from Rs. 19,144 to Rs. 35,501. Similarly, the average loan size for Tarun category accounts grew from Rs. 7,27,407 to Rs. 8,39,887. Interestingly, the Kishore category saw a decline in average loan size, dropping from Rs. 1,98,472 to Rs. 1,08,796 during the same period. This suggests that while more people are seeking loans under the Kishore category, the average loan amount being requested is smaller.
NPAs account for 2.62% against the total disbursement as of March 2022
An analysis of the non-performing assets under PMMY shows that the NPA ratio against the credit disbursement is low. The central government informed the Lok Sabha that Non-Performing Assets (NPA) under the PM MUDRA scheme remain very low across the country. During the Question Hour in the Lok Sabha, Union Finance Minister Nirmala Sitharaman stated that the overall NPA on loans disbursed under the scheme stands at just 2.10% of the total amount given to beneficiaries. This is the lowest since the inception of the scheme.
As per a Parliamentary response from August 2024, as of March 2024 (provisional), 76.29 lakh accounts amounting to Rs. 43,407.09 crore have turned into Non-Performing Assets (NPAs). NPAs in the Kishor category top with Rs. 23,619 Crores, followed by the Tarun category at Rs.12,914 Crores and the Shishu category at Rs. 6,874 Crores.
