Earlier this month, BJP President Amit Shah claimed that 72.8 million people got self-employed under the PM’s scheme “Pradhan Mantri Mudra Yojana” (PMMY). But how far is his claim accurate?
What is MUDRA?
MUDRA stands for Micro Units Development & Refinance Agency Ltd. This scheme aims to promote lending to small businesses. To help businesses take off, MUDRA offers loans ranging from INR 50,000 to 1 million. Amit Shah claimed that 72.8 million people became self-employed under the PMMY scheme to the tune of INR 3.17 trillion. But how far is his claim true?
The estimated number of new job seekers entering the job market every year is 12 million. Then how did 72.8 million people get self-employed in a mere 2 years? If that were the case, it flies in the face of data and also popular sentiment.
From the Data in the MUDRA Site
In the years 2015 & 2016 – it paid out of INR 74.5 million loans worth INR 3 trillion – close to Shah’s claims. But the money isn’t exactly from MUDRA which is known as a refinance bank. In other words, it lends money to the poor. Actually the money comes from banks & Micro Finance Institutions (MFIs). While banks lent 65% of the cash under PMMY, MFIs lent 35%. And in the fiscal year 2015-16, MFI lending increased from INR 459 billion to INR 568 billion, a 23.8% rise, while bank lending increased from INR 860 billion to INR 1.28 trillion, a 49% rise.
Is PMMY Merely Packaging an Already Existing Bank/MFI Procedure?
MUDRA CEO Jiji Mammen claimed that MUDRA’s refinancing ability boosted the already existent bank/MFI lending to the micro sector. But MUDRAs data suggests that banks/MFIs are yet to avail the MUDRA facility. While banks only availed loans worth INR 27 billion, 3.1% of all bank lending under the scheme, MFIs availed only 1.34% of the refinance scheme. As addendum, even before PMMY, MFI loans to poorer sections already increased 55% from INR 235 billion in 2014 to INR 375 billion in 2015. Bank lending data was unavailable on MUDRA’s site. But RBI’s data on banks’ outstanding loans under INR 1 million indicates how much banks lent to the micro sector. While banks had INR 1 trillion for outstanding loans under INR 1 million in 2013, it increased 50% to INR 1.5 trillion in 2014. Mr. Mammen claimed NITI Aayog is making an effort on assessing PMMY to know how many jobs were created.
According to Vijay Mahajan Micro Finance expert notes: Micro finance is 20 years old and has grown from nothing in 1997 to over INR 600 billion in 2017. Banks & Non Banking Financial Companies added another INR 400 billion to make it a total of 1 INR trillion. But none of it is due to MUDRA, which only refinanced 1-3% of the loans.