India to provide 57 million Small Business Units Institutional Finance
New Delhi: 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 â€“ plus solution for these enterprises spread across the country. The roles envisaged for MUDRA would include:
Â· Laying down policy guidelines for micro enterprise financing business
Â· Registration of MFI entities
Â· Accreditation /rating of MFI entities
Â· Laying down responsible financing practices to ward off over indebtedness and ensure proper client protection principles and methods of recovery
Â· Development of standardised set of covenants governing last mile lending to micro enterprises
Â· Promoting right technology solutions for the last mile
Â· Formulating and running a Credit Guarantee scheme for providing guarantees to the loans/portfolios which are being extended to micro enterprises
Â· Support development & promotional activities in the sector
Â· 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 â€˜own account enterprisesâ€™ (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.