SKOCH Report Card of MUDRA


Modi Government Generates 5.5 Crore Jobs Through Mudra Loans. Incremental Job generation due to PMMY pegged at 1.7 crore in two years

Pradhan Mantri MUDRA Yojana (PMMY), which provides access to institutional finance (MUDRA Loans of <10L) to small business units and entrepreneurs, has led to 5.5 crore jobs in just over two years, addressing the most critical challenge facing the country.

According to the survey titled ‘MUDRA Scheme: a Game Changer Initiative on Job Creation’, a total of 54,479,763 jobs have been generated through MUDRA. These include 37,753,217 direct jobs and 16,726,545 indirect jobs. The report was released at the 49th SKOCH Summit at New Delhi.  

MUDRA scheme has emerged as the dark horse of Modi Government. This is addressing the most critical problem facing the country today, jobs,” said Sameer Kochhar, Chairman, SKOCH Group and author of the Report.

MUDRA scheme was launched by Prime Minister Narendra Modi on 8 April 2015 with an objective to “fund the unfunded”. MUDRA loans are available for non-agricultural activities upto Rs 10 lakh. Loans are divided in three categories: Shishu (loans upto Rs 50,000); Kishore (loans from Rs 50,001 to Rs 5 lakh); and Tarun (loans up to Rs 10 lakh).

Highlighting the success of MUDRA scheme, Kochhar, a reforms historian and author of best-seller ModiNomics, said, “MUDRA scheme is focused on creating small entrepreneurs. The scheme has successfully created an ecosystem of entrepreneurs at the ground level. Moreover, it is having very impactful multiplier effect on job-creation.” 

So far, Rs 3.42 lakh crore MUDRA loan has been disbursed to over 8 crore people, mostly small entrepreneurs. A substantial number of these people are those who were not involved in any kind of business before. Activities allied to agriculture, such as dairy, poultry, bee-keeping etc, are also covered. 

MUDRA Scheme: a Game Changer Initiative on Job Creation’ is a first of its kind report that highlights job linkage of MUDRA scheme. The report is based on the primary data collected from Micro Units Development & Refinance Agency Ltd (MUDRA Ltd), banks and financial institutions and also from the beneficiaries of the scheme. 

Data available with MUDRA, banks and financial institutions pertains primarily to opening of accounts and loan disbursal. It does not capture any numbers on employment generation. SKOCH did an extensive ground work to correlate the loan data with job creation. Nobody else has done it so far, added Kochhar.

“I appreciate SKOCH Group for doing this report. This required a lot of data collection and analysis. This report captured the data from banks almost on the real time basis,” said Jiji Mammen, CEO, MUDRA Ltd, while complimenting the SKOCH Group on its report on the MUDRA scheme. 

According to the Report, which is based on a ground level work and analysis of primary data collected from different stakeholders, including Micro Units Development & Refinance Agency Ltd (MUDRA Ltd), banks, financial institutions and also from the beneficiaries of the scheme, Rs.3.42 lakh crore of MUDRA loan has led to the generation of 5.5 crore jobs in just over two years.   

“Data available with MUDRA, banks and financial institutions are primarily on opening of accounts and loan disbursal. They do not capture any numbers on employment generation. We have done an extensive ground work to correlate the loan data with job creation. Nobody else has done it so far,” said Kochhar. 

Table 1

Overall Methodology

  • MUDRA Ltd was approached to obtain overall performance data of PMMY
  • Public sector banks were approached to provide data on their MUDRA performance and jobs generated. ?
  • Banks spoke to their divisions, who in turn spoke with a cross-section of their branches who further contacted a number of loan beneficiaries to estimate jobs created in each category of loan. ?
  • Based on the loan category-wise job averages, banks submitted their national job generation figures. ?
  • The participating banks were: a. State Bank of India; ?b. Punjab National Bank; c. Union Bank of India; d. Corporation Bank;?and, e. Vijaya Bank.
  • Together they represent 5.76 per cent of total accounts opened nationally and 19.19 per cent share of amount disbursed. ?
  • Extrapolating their average job-generation category-wise to cumulative category-wise accounts opened nationally, SKOCH arrived at the number of direct jobs created nationally. ?
  • Through direct discussions with field based organisations, bankers and loan beneficiaries, SKOCH arrived at the multiplier for indirect jobs created per direct job category-wise. 

Representatives of leading banks said that SKOCH Group report is based on scientific methodology and has revealed data, which is crucial for policymaking. 

“Due to MUDRA scheme the amount of small lending by SBI almost doubled to Rs 22,000 crore in the financial year 2015-16 from Rs 12,000 crore in the previous year,” said H C Nemiraja, General Manager, State Bank of India. He further added Nemiraja that the sharpest jump in loan disbursal due to MUDRA scheme has been in Tier 2 and Tier 3 cities and semi-urban areas. “In SBI we have created a separate wing for MUDRA and other government scheme,” Nemiraja said adding the country’s largest lender was putting a lot of effort on small lending. 

Table 2

According to the Report, another noteworthy thing about the MUDRA scheme is that it is inclusive. Its focus has been on the underprivileged sections of the society. Nearly half of the beneficiaries under the scheme belong to underprivileged class. This includes 20 per cent of the Scheduled Caste category, 5 per cent from Scheduled Tribe and 35 per cent from Other Backward Classes. Interestingly, over 70 per cent beneficiaries are women. This clearly indicates that the scheme is well targeted.  

Incremental Jobs Created
The Report has a separate section focused on incremental increase in jobs due to MUDRA scheme. Total number of incremental direct jobs created due to MUDRA in the first two years (April 2015 to March 2017) stood at 11,696,576. It also led to the generation of 5,146,494 indirect jobs. Thus the total number of incremental jobs generated in two years stood at 16,843,070. “This means, had the MUDRA scheme not been launched, these jobs would not been generated,” says Kochhar. ?

Lending under MUDRA scheme has been higher than the government targets and projections. Beating the targets is an achievement and good sign for any scheme, so is the case with the MUDRA. However, it poses a challenge. High disbursements have been done by the Government-run banks and financial institutions, may be to meet their targets. As the loans are collateral free, a proper risk evaluation is crucially important. The success of the scheme in the long run will largely depend on the proper risk evaluation and management.

Disbursed Amount (in Cr. Rs.)

Cost of Job Generation 
According to the report, under Shishu category Rs.1.62 lakh crore loan amount was disbursed that led to direct job creation of 30,263,088. This is the most cost-effective. Just Rs 53,727 loan generated one job. 

Under Kishore category Rs 1.01 lakh crore of loan disbursed. This led to the generation of 58,19,486 direct jobs. In this category Rs 1.74 lakh loan amount led to generation of one job. 

Under Tarun category, Rs 77,724.46 crore loan was disbursed. This led to generation of 16,70,643 jobs. In this category, Rs 4.65 lakh loan amount led to generation of one job. Average credit of Rs 90,591 created one job. 

Table 3

How do States Fare
The Report also highlighted the need for pushing the benefits of the scheme to the ‘hard-to-reach-areas’. “Over 70 per cent of the total disbursals under the MUDRA scheme is concentrated in 10 states. Traditionally industrially advanced states like Tamil Nadu, Karnataka and Maharashtra have got the lion’s share, while the backward states, especially North Eastern states lag far behind. Economically backward states need such schemes the most. Some mechanism must be devised to reach to the areas, which are hard to reach,” the Report highlights. 

With Rs 38,138.42 crore loan disbursed, Tamil Nadu is at the top performing states in MUDRA scheme. Karnataka is at the second spot with Rs 37,541.76 crore of loan disbursal during April 2015 to June 2017 period. MUDRA scheme was launched on 8 April 2015. The report is based on the data collected till June 30, 2017. 

In terms of total jobs creation, Tamil Nadu tops with 71.88 lakh jobs, while Karnataka comes second with 62.58 lakh. Maharashtra comes third with 48.96 lakh jobs; Uttar Pradesh, the largest populated state of India, came fourth with 46.64 lakh. West Bengal, Bihar, Madhya Pradesh and Rajasthan came at fifth, sixth, seventh and eighth position, respectively. 

Mammen announced that the Government was taking steps to ensure that the benefits of the scheme reach more to the areas where it is required the most. 

“We are taking steps. Less developed districts have been given higher targets. We are trying to ensure that the benefits reach to the poor states more,” said Mammen.

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