The Prime Minister Shri Narendra Modi will launch the Micro Units Development and Refinance Agency Ltd. (MUDRA) - a Bank tomorrow at a function at Vigyan Bhavan in the national capital.
Earlier in his Budget Speech for Financial Year (FY) 2015-16, the Union Finance Minister Shri Arun Jaitley had proposed the creation of a Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs.20,000 crore, and credit guarantee corpus of Rs.3,000 crore. MUDRA, to be set up through a statutory enactment, would be responsible for developing and refinancing through a Pradhan Mantri MUDRA Yojana, all Micro-finance Institutions (MFIs) which are in the business of lending to micro / small business entities engaged in manufacturing, trading and service activities. 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 roles envisaged for MUDRA would include:
· Laying down policy guidelines for micro enterprise financing business
· Registration of MFI entities
· Accreditation /rating of MFI entities
· Laying down responsible financing practices to ward off over indebtedness and ensure proper client protection principles and methods of recovery
· Development of standardised set of covenants governing last mile lending to micro enterprises
· Promoting right technology solutions for the last mile
· Formulating and running a Credit Guarantee scheme for providing guarantees to the loans/portfolios which are being extended to micro enterprises
· Support development & promotional activities in the sector
· Creating a good architecture of Last Mile Credit Delivery to micro businesses under the scheme of Pradhan Mantri MUDRA Yojana
These measures to be taken up by MUDRA are targeted towards mainstreaming young, educated or skilled workers and entrepreneurs including /women entrepreneurs. The Government of India believes that development and growth have to be inclusive. According to the NSSO Survey of 2013, there are some 5.77 crore small business units, mostly individual proprietorship, which run manufacturing, trading or services activities. These encompass myriad of small manufacturing units, shopkeepers, fruits / vegetable vendors, truck & taxi operators, food-service units, repair shops, machine operators, small industries, artisans, food processors, street vendors and many others. Most of these 'own account enterprises' (OAE) are owned by people belonging to Scheduled Caste, Scheduled Tribe or Other Backward Classes. The biggest bottleneck in the growth of entrepreneurship in this sector is the lack of financial support. A vast part of the non-corporate sector operates as unregistered enterprises and formal or institutional architecture has not been able to reach out to meet its financial requirements. 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.
Since the enactment for MUDRA is likely to take some time, it is proposed to initiate MUDRA as a unit of SIDBI to benefit from SIDBI's initiatives and expertise.
Products and Offerings
The primary product of MUDRA will be refinance for lending to micro businesses / units under the aegis of the Pradhan Mantri MUDRA Yojana. The initial products and schemes under this umbrella have already been created and the interventions have been named 'Shishu', 'Kishor' and 'Tarun' to signify the stage of growth / development and funding needs of the beneficiary micro unit / entrepreneur as also provide a reference point for the next phase of graduation / growth for the entrepreneur to aspire for:
· Shishu: covering loans upto Rs. 50,000/-
· Kishor: covering loans above Rs. 50,000/- and upto Rs. 5 lakh
· Tarun: covering loans above Rs. 5 lakh and upto Rs. 10 lakh
Businesses/entrepreneurs/units covered would include proprietorship/partnership firms running as small manufacturing units, shopkeepers, fruits/vegetable sellers, hair cutting saloon, beauty parlours, transporters, truck operators, hawkers, co-operatives or body of individuals, food service units, repair shops, machine operators, small industries, artisans, food processors, self help groups, professionals and service providers etc. in rural and urban areas with financing requirements upto Rs.10 lakh.
The products initially being launched are as under:
· Sector/activity specific schemes, such as schemes for business activities in Land Transport, Community, Social & Personal Services, Food Product and Textile Product sectors. Schemes would similarly be added for other sectors / activities.
· Micro Credit Scheme (MCS)
· Refinance Scheme for Regional Rural Banks (RRBs) / Scheduled Co-operative Banks
· Mahila Uddyami Scheme
· Business Loan for Traders & Shopkeepers
· Missing Middle Credit Scheme
· Equipment Finance for Micro Units
Credit Plus Approach
MUDRA would also adopt a credit plus approach and take up interventions for development support across the entire spectrum of beneficiary segments. The highlights of such proposed interventions / initiatives are as under:
· Supporting financial literacy
· Promotion and Support of Grass Root Institutions
· Creation of Framework for "Small Business Finance Entities"
· Synergies with National Rural Livelihoods Mission
· Synergies with National Skill Development Corporation
· Working with Credit Bureaus
· Working with Rating Agencies
Other Proposed Offerings: Going forward, offerings as under are also envisaged:
· MUDRA Card
· Portfolio Credit Guarantee
· Credit Enhancement
MUDRA will build on experiences of some of the existing players who have demonstrated ability to cater to the Non Corporate Small Business segment to build a financing architecture and right ecosystem for both the entrepreneurs as well as the last mile financiers to the segment. Access to finance in conjunction with rational price is going to be the unique customer value proposition of MUDRA. The establishment of MUDRA would not only help in increasing access of finance to the unbanked but also bring down the cost of finance from the Last Mile Financiers to the informal micro / small enterprises sector. The approach goes beyond credit only approach and offers a credit – plus solution for these myriad micro enterprises, creating a complete ecosystem spread across the country.
CA Yashu Goel