Funding for the unfunded
Following yet another developmental agenda, Prime Minister Narendra Modi today unveiled MUDRA Bank, which will provide credit of up to Rs.10.lakh to small entrepreneurs and act as a regulator for ‘Micro-Finance Institutions’ (MFIs).
In his speech Prime Minister said, Rs.20,000-crore MUDRA Bank will employ about 12 crore people in the country and its average size loam amount will be Rs.17,000.
The roles envisaged for MUDRA include laying down policy guidelines for micro enterprise financing business and registration of MFI entities as well as their accreditation and rating. There are about 5.77 crore small business units.
Talking about the Micro Units Development Refinance Agency (MUDRA) Bank, PM Modi said it is aimed at providing financial assistance to the “unfunded” small entrepreneurs who provide employment to a large number of people.
He said that the small entrepreneurs of India are used to exploitation at the hands of money lenders so far, but MUDRA will instil a new confidence in them that the country is ready to support them in their efforts that are contributing so heavily to the task of nation building.
Generating employment and promoting self-employment is the priority of the government, the PM said, adding, “providing loans to small entrepreneurs will provide a big push to the GDP.”Small borrowers repay loans promptly, he said, stressing that “saving is a habit in India and there is a need to (give a) push to this traditional strength.”
Exuding confidence over the success of the MUDRA Bank initiative, Modi said, “Write down my words. After one year, bankers will queue in front of MUDRA Bank and ask it to give 50 lakh clients.”
He said that the biggest asset of the poor is his imaan. By combining their integrity with MUDRA, it would become the key to their success
Speaking at the same event, Finance Minister Arun Jaitley said MUDRA Bank is aimed at “funding the unfunded”.
The Finance Minister regretted that although 20 percent of the country’s population in dependent on 5.7 crore micro and small entrepreneurs, they do not have access to institutional credit.
It will also lay down “responsible financing practices” to ward off over indebtedness and ensure proper client protection principles and methods of recovery, besides development of standardised set of covenants governing last mile lending to micro enterprises.
“Providing access to institutional finance to such micro/small business units/enterprises will not only help in improving the quality of life of these entrepreneurs but also turn them into strong instruments of GDP growth and employment generation,” the Finance Ministry said in a statement.
MUDRA is to be set up through a statutory enactment. It would be responsible for developing and refinancing through a Pradhan Mantri MUDRA Yojana.
Since the enactment for MUDRA is likely to take some time, it is proposed to initiate the Bank as a unit of SIDBI to benefit from SIDBI’s initiatives and expertise.
MUDRA would also partner with state/regional level coordinators to provide finance to “Last Mile Financiers” of small/micro business enterprises.
“Further, the approach goes beyond credit only approach and offers a credit – plus solution for these enterprises spread across the country,” the Ministry said.
Among others, MUDRA would benefit small manufacturing units, shopkeepers, fruits and vegetable sellers, hair saloon, beauty parlours, truck operators, hawkers, artisans in rural and urban areas with financing requirements up to Rs 10 lakh.
The Finance Ministry said measures to be taken up by MUDRA are targeted towards mainstreaming young, educated or skilled workers and entrepreneurs including women entrepreneurs.