Sme Birbal

EQUITABLE TO MUDRA LOANS- Micro Enterprises

MUDRA loans at the lower end of economic strata can turn the lives of many micro-enterprises, but the delivery process needs to be toned up.

I tracked the story of a female entrepreneur running a small grocery store with a strong focus on dairy business in our area. We've been here for more than five years in this place. We've bought a dairy product from her until recently. Unfortunately, due to the lack of adequate finance and the inability to raise the capital required to have their own license, she recently closed her shop.

She had run her company without bank financing in this locality, while she holds a savings bank account in a public sector bank. She's been trying to secure financing from the bank all the time, but no use. Her business lived on informal sources ' support.

Despite not being able to scale up a business, it was surviving. The informal source of funding, however, became a problem after demonetization. Slowly this origin started to dry up and use it at a very high rate, even if it was available.

There was no funding for bank loans, as I said earlier. Further aggravated her already precarious financial condition by the lack of money from informal sources. There was no help in her desperate visits to the bank. She pleaded to get a license from Amul Milk for only three lakhs of loan. Because of her failure to collect a secure financing scheme, she has recently folded her company while her nearby rivals earn a good selling milk profit.

MUDRA is a great bank loan network, but access is uncertain:

is for the Production and Refinance of Micro-Units. Mudra Yojana offers loans to people who turn up to Rs 10 lakhs for entrepreneurs.

MUDRA is a powerful financial infrastructure to fund the vulnerable entrepreneurial ventures for people in lower social strata who have no formal structure or bookkeeping. can make financial resources available to grow companies at an affordable price. It has the potential to reduce society's inequalities by catalyzing the allocation of resources in the various economic activities, resulting in higher productivity in conducting economic activity.

Its mission is expected to be carried out by all banks, including private banks. The truth, however, is different. MUDRA's current accessibility structure is highly skewed by banks in the public sector. In participating in this financial architecture, private banks are disinterested. Even though it's also there, it's just for aesthetics that a serious business idea.

Even among banks in the public sector, the enthusiasm between the branches is not uniform and highly variable.

Private Banks are essential to MUDRA's future growth:

The recent trend in banking business development indicates that many of the small businesses have a banking relationship with banks in the private sector. The section includes private banks of the new generation, private banks of the old generation, and Small Finance Banks. Their share of the branch network is increasing as well as mobilizing new business is growing by a huge margin compared to banks in the public sector.

Private sector banks do not extend loans without collateral protection to entrepreneurs unless there is stronger support for collateral and stable income from data. In such cases, start-ups are not qualified. Such loans are considered expensive and highly limited under the business loan segment.

There's too much uncertainty:

In all, the situation at ground level reflects that it is highly uncertain to expect funding to be guaranteed even though they were a very successful running business.

It is a common refrain across the country that despite having enough resources to be successful, micro-entrepreneurs do not get enough support from formal banking channels. Access to loan facilities is consistently denied because there are no such products in many banks or Govt / Regulators ' active engagement frameworks to promote deeper penetration of this platform.

Microenterprises ' importance:

According to the 2016-2017 National Sample Survey, there are 633.88 lakhs MSMEs in India and the majority of them are micro-enterprises. The is made up of 630,52 lakh units, nearly 99 percent of India's MSME universe.

Microenterprises are an important link on both sides of the business value chain as a supplier of very specific skills/products to produce a product and, on the other hand, a last-mile connection to deliver the product to consumers. The partnership with these micro-enterprises is essential to their business strategy for many large companies.

What's the way to go?

There is a need to make work independently of the bank and borrowers can look for MUDRA loans directly on an online platform. This will make banks more available to successful borrowers at the peak stage

On the other hand, under this financial architecture, the Govt needs to collaborate with all banks to resolve their lending concerns. This will help MUDRA to deepen its penetration far and wide by instilling trust in borrowers to participate in the platform.

This is going to make the process transparent. To ensure that such loans are not rejected without merit, a proper monitoring mechanism should be in place. The necessary modification in lending in the Priority Sector, such as fixing a number of loans and loan tickets, can be done to stimulate MUDRA loan growth and create sufficient capital assets in the economy.

Conclusion:

has the potential to make millions of micro-entrepreneur's livelihoods better. However, to make the delivery process more palpable, policymakers need to engage more actively with banking institutions.