MUDRA YOJANA AND MSME SECTOR: PERFORMANCE ANALYSIS

Abstract

In India, the MSME sector is not just the second largest sector in employing unskilled and semi-skilled people but also contributes around 40% of the entire exports. In spite of this significant economic importance, the MSME sector usually remains credit deprived sector. Micro Units Development and Refinance Agency (MUDRA) under PMMY was launched to provide financial assistance to MSMEs and bring them under the fold of the financial mainstream. With the motto of “fund the unfunded”, MUDRA focuses on the marginalized sections of the society like women entrepreneurs, SC-ST entrepreneurs and others. This paper tries to look into the impacts of different loans being offered under MUDRA Yojana and the change it induced on the ground level. This paper tries to examine the sectoral distribution of MUDRA loans in Nation and Region- wise and analysis MUDRA Bank’s reach to different social categories. Also, this paper tries to provide alternative strategies for roadmaps. Analysis of the paper shows that MUDRA loans have made a positive impact on the bottom line of MSMEs, but the value of loans sanctioned is not aligned with MSMEs’ business requirements. The sector has always been credit-starved due to a variety of reasons including lack of credit history, inability to provide security/collaterals, etc. These factors effectively debilitate entrepreneurship, employment generation, economic activity, and the livelihood support of millions.