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Mudra loans have been a tremendous success in Tamil Nadu since it fulfills an essential need. People even in relatively developed states like Tamil Nadu still find it difficult to get access to credit for their businesses due to various factors such as lack of collateral. To address these challenges and to help micro, small and medium enterprises (MSMEs) get access to formal credit without collateral backup, the Union government launched the Pradhan Mantri Mudra Yojana (PMMY) or Mudra scheme in 2015. The interest rates are transparent and affordable compared to other modes of loans available in the market.

Under the Mudra scheme, three types of loans namely Shishu- up to Rs.50,000, Kishor- Rs. 50,001-Rs. 5 lakh, and Tarun- Rs. 5 lakh to Rs. 10 lakh are provided to help business enterprises in manufacturing, processing, trading, services, and allied activities of agriculture. Lending institutions have been given a clear mandate and thrust to give loans to eligible business enterprises as much as possible. The major lenders are all public and private sector commercial banks, state co-operative banks, regional rural banks, microfinance institutions, NBFC -microfinance institutions, non-banking financial institutions, and small finance banks.

During the last seven years, the Mudra loans scheme has been a phenomenal hit among the MSMEs including in Tamil Nadu and played a key role in infusing confidence and lubricating business enterprises of all kinds with working capital backup. About 6,000 products are manufactured by MSMEs and employ several millions of people both directly and indirectly.

More than 23.27 crore Mudra loans amounting to Rs 8.10 lakh crore were given to women. This constitutes about 68% of the total number of loans and 44% of the amount of loans provided.

According to the latest data available, as of 18.03.2022, under the scheme, cumulatively over 34.28 crore accounts involved a sanctioned amount of Rs. 18.52 lakh crore, out of which Rs.17.99 crore (97.19%) was dispersed across the country. Out of this, more than 23.27 crore loans amounting to Rs 8.10 lakh crore were given to women. This constitutes about 68% of the total number of loans and 44% of the amount of loans provided.

As per the Udyog Aadhaar Registration report, a total of 1,105,983 MSMEs were registered in Tamil Nadu, out of which 9,68,497 are micro-enterprises and 1,33,123 are small enterprises, and 4,362 are medium enterprises. Tamil Nadu’s share is 10.81% of such enterprises in India. The percentage share of Tamil Nadu’s micro, small and medium enterprises is 10.81%, 10.91%, and 8.75%, respectively.

The Mudra scheme has been the most popular in Tamil Nadu for access to credit for MSMEs. Registration and compliance to loan norms for these MSME units are easy in Mudra. The total number of accounts under the scheme is 4.08 crore or 12% of all-India figures. So far, the total loan amount dispersed to beneficiaries is Rs.1,85,420.03 crore, which is 10.30% of all-India.

In a reply to a question raised in Parliament (Rajya Sabha) on 05.04.2022, it was reported that as of 25.02.2022, there was a total of 2,64,46,737 women entrepreneurs in Tamil Nadu which is 11.49% in the country. The total amount of loans dispersed to women entrepreneurs was Rs.89,235.22 crore, which is 11.67% of the country.

The total share of Mudra loans accounts operated by women entrepreneurs in Tamil Nadu was 65.61%. The total sanctioned loan amount for women entrepreneurs in Tamil Nadu was 48.57% which is 5% higher than all of India’s shares. Also, the total loan amount dispersed to women entrepreneurs in Tamil Nadu was 48.81% which is 6% higher than all of India’s share of women entrepreneurs.

Tamil Nadu has about 5 million MSMEs in the state employing one crore people, which is the 3rd highest in the country. The state government in 2020-21 has arranged loans of Rs 1 lakh crore through its agencies to less than 19 lakh units in the state. Some 3 million units did not get any credit. Mudra scheme is there to bridge such gaps.

Tamil Nadu has a total population of about 8 crores, out of which about 6.28 crore are adults aged 18 and above. People ask how for 6.28 crore people in the state, 4.07 crore loan accounts are there under the Mudra scheme in Tamil Nadu? But this is a misunderstanding.

The Mudra scheme’s aim is not to give loans to every single individual in the country or state. Mudra scheme is an institutionalized “refinancing” model to bridge the gaps in the lack of continuous access to timely financial support for MSMEs. The scheme is not a typical standard model loan.

For instance, Tamil Nadu has about 5 million MSMEs in the state employing one crore people, which is the 3rd highest in the country. Most of them are in the informal sector. The state government in 2020-21 has arranged loans of Rs 1 lakh crore through its agencies to less than 19 lakh units in the state. Some 3 million units did not get any credit. Mudra scheme is there to bridge such gaps.

Contrary to what this article says, in business it’s not possible to give one person just one loan when even a tiny business needs continuous cash flow throughout the year. And it is not possible to club all the loans as one account either. Under the Mudra scheme, the beneficiary is allowed to take loan amounts more than once in all three categories after repaying the availed loan with interests in a financial year to help their working capital requirements. Each time the loan beneficiary is counted afresh. It may also be the case that a beneficiary may be taking Mudra loans from different lenders.

Tamil Nadu’s MSMEs department has set an ambitious goal of achieving in 10 years Rs.5 lakh crore investments and additional employment opportunities for 50 lakh persons. The plan is to scale up 10% of micro enterprises to small/medium level. This is not possible without the availability of formal banking credit linkages that Mudra scheme provides.

(The author is an economist and public policy expert)

 


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