Contrary to the claim by India’s saffron rulers, who recently said that 55% of all accounts opened under the Pradhan Mantri Mudra Yojana (PMMY or the Prime Minister’s Small Business Finance Scheme) belong to individuals from scheduled castes (SC), scheduled tribes (ST) and other backward classes (OBC), a top data analysis site has revealed that it is the general category which gained the most.
According to FactChecker, “Individuals in the general class received 63% of the total loan amount disbursed in 2017-18, followed by OBCs (22%), SCs (11%) and STs (4%). The breakdown in previous years shows minor fluctuations, but no significant change.”
Even if considering that the BJP rulers’ claim is true, says FactChecker, it is not enough. To quote from the analysis, “Together, SCs, STs and OBCs form 78.4% of the India’s population, so if 55% of PMMY accounts are in their name this is an under-representation.” It adds, “The proportion of OBC, SC and ST groups accessing higher-value loan amounts has not increased since the scheme’s inception.”
Further, it says, “The largest-value loans, of above Rs 10 lakh, have been given disproportionately to general category individuals, to the extent of 88.7%. And the average loan size, Rs 45,203, may be too small to have a meaningful impact on job creation.”
“Majority of loan amounts have been disbursed under the Shishu category, these are quite small to create a new business unit,” the top site quotes Happy Pant, head of advocacy at the Centre for Budget and Governance Accountability, a nonprofit, as saying.
Giving details of the PMMY scheme, the site says, it was launched by Prime Minister Narendra Modi in April 2015 to “improve access to microfinance for non-corporate, non-farm small/micro enterprises and stimulate job creation. Individuals can apply to private or public banks for loans of up to Rs 10 lakh without having to provide collateral.”
The scheme was launched against the backdrop of a large number of micro and small enterprises in India belonging to marginalised groups, who lack access to formal credit. Forced to deal mostly in cash, it was felt, they were forced rely on informal sources of finance such as small-time moneylenders who often charge 60%-100% interest.
Yet, FactChcker notes, under MUDRA, “majority of loan amounts disbursed under the two highest-value categories – Kishor (loan value between Rs 50,000 and Rs 5 lakh) and Tarun (Rs 5-10 lakh) – went to those in the general category, and by a substantial margin.”
It adds, “In fact, the percentage share of loan amounts disbursed to the general class under the Kishor category has increased from 73.7% in 2015-16 to 76.8% in 2017-18. Similarly, under the Tarun category, loan amounts disbursed to general category account holders have risen from 83.6% in 2015-16 to 88.7% in 2017-18.”
“However”, regrets FactChecker, “The average size of a MUDRA loan since the scheme’s inception is just Rs 45,203. No more than 1.4% of loans disbursed have been larger than Rs 5 lakh, according to MUDRA data.”
It adds, “Commentators have questioned whether the small size of the average loan can enable employment generation and economic growth. Some critics have also pointed out that most self-employed people may not have full-time work – they may actually be underemployed.” It quotes Pant as saying, “It is difficult to understand how important MUDRA is as a source of job creation, since no count of the number of ‘created’ jobs exists. There is no formal data on employment generated due to these loans.”
While MUDRA is supposed to boost the government’s job-creation credentials, the site says, “When FactChecker asked the MUDRA Head Office to share data on jobs directly created through the disbursement of loans under the scheme, they were unable to provide any.”
“The details of jobs generated under the scheme are not being captured on the MUDRA portal,” said Ramakant Babu Rahate, deputy general manager at MUDRA, in an email response to FactChecker. “However, the portal captures data pertaining to new loan accounts/entrepreneurs. Total 3.50 crore new entrepreneurs have availed loans under MUDRA Yojana in last three years.”
“This response was based on the assumption that the number of loan accounts opened equals the number of entrepreneurs, which may be inaccurate”, comments the site.