PM Mudra Yojana: A Catalyst for Change in India’s Destiny

In the UPA era, the financial system was anything but fair. It was a world where loans often went to the well-connected and powerful, leaving ordinary people struggling to get a foot in the door. Politically influenced lending, often through "phone banking," prioritized big businesses over small entrepreneurs, while minority communities and micro-business owners were pushed aside due to complicated paperwork and lack of support.

Meanwhile, banks handed out reckless loans to large corporations, with NPAs piling up making it harder for genuine borrowers to get credit. Small farmers and small-scale businesses were left to rely on informal and often exploitative lenders. This broken system created a vacuum that Mudra stepped into, offering a fresh, inclusive approach that truly gave everyone an equal chance to access the credit they needed to succeed.

Over 52 crore loans worth ?32.61 lakh crore have been sanctioned since the scheme’s launch in April 2015, fuelling a nationwide entrepreneurial revolution. No longer confined to big cities, business growth is now spreading to small towns and villages, where first-time entrepreneurs are taking charge of their destinies. The shift in mindset is evident—people are no longer job seekers; they are becoming job creators.

Under the scheme, three categories of interventions have been formulated which include; Shishu (Loan up to ?50,000); Kishor (Loan above ?50,000 and up to ?5 lakh); Tarun (Loan above ?5 lakh and up to ?10 lakh) and additionally Tarun Plus (Loans above ?10 lakh and up to ?20 lakh). Over the years, Mudra Yojana has reshaped India’s entrepreneurial landscape, drawing global recognition as a model for financial inclusion.

Mudra Sparking Ripples of Change

For many, especially in rural and semi-urban areas, Mudra loans became the first step toward business ownership.[1] Beyond individual success stories, Mudra Yojana has fostered broad economic benefits. According to “Outcomes of ModiNomics 2014-24” report by SKOCH in 2024, at least 5.14 crore person-years of employment on average every year has been generated since 2014 with the (PMMY) itself adding 2.52 crore steady and sustainable employment as an average per year since 2014.[2] One example of this transformation is J&K; it has been highly benefited under the MUDRA scheme that is evident from the fact that in J&K 20,72,922 loans has been sanctioned.[3]

By formalizing informal sector businesses, the PM Mudra scheme has expanded the nation’s tax base and strengthened the financial ecosystem. PMMY has encouraged an entrepreneurial mindset among the youth, especially in smaller towns and villages. Loans worth ?10 Lakh Crore helped new entrepreneurs take off.

Many beneficiaries have upskilled themselves to manage and expand their enterprises. By reducing the fear of financial failure through accessible credit, the scheme has emboldened individuals to take business risks and contribute to a more vibrant entrepreneurial ecosystem. Following are some second and third order ripple effects:

1.     Job Creation:  By enabling businesses to grow, the scheme has generated direct and indirect employment opportunities, particularly in rural and semi-urban areas. 1 crore+ jobs generated in 2015-18 through Mudra-supported businesses

2.     Financial Inclusion: The scheme has brought first-time borrowers into the formal credit system

3.     Women Empowerment: A significant proportion of Mudra loans (nearly 70%) have been availed by women entrepreneurs, enhancing their financial independence and contributing to gender equality

a.      In the last nine years (FY25 over FY16) while per woman PMMY disbursement amount increased by a CAGR of 13% to Rs 62,679, the per woman incremental deposits increased by a CAGR of 14% to Rs 95,269.

4.     Skill Development: Many beneficiaries have used Mudra loans not only for business expansion but also for acquiring new skills or upgrading technology, thereby improving productivity.

5.     Social Empowerment: The scheme has fostered a sense of self-reliance among marginalized groups by enabling them to sustain their livelihoods through entrepreneurship. SC, ST, & OBC entrepreneurs received over 50% of all Mudra loans.

6.     Builds Creditworthiness of people: When borrowers take a Mudra loan and make timely repayments, their credit behaviour gets recorded in financial databases. This track record is essential for building a credit history, which helps them qualify for future loans or credit products.

7.     Business Expansion: Loans under PMMY have enabled small businesses to expand operations, diversify product lines, and upgrade technology, improving productivity and competitiveness.

8.     Reduction In Poverty: By enabling individuals to launch income-generating activities, these loans also help in reducing poverty.

9.     Reduction in consumption of intoxicants: When borrowers see tangible benefits from investing in their businesses, the incentive to divert resources to less productive or harmful habits, such as consuming intoxicants, diminishes.[4]

10.  Rise of fintech: The rise of fintech like UPI & receipt of Direct benefits transfer has also brought a new dimension to financial inclusion by introducing innovative products and services that reach previously underserved populations after being enrolled into banking system.

11.  Improved Self-Esteem and Social Standing: The scheme helps individuals transition from being dependent on informal financial sources to becoming recognized business owners. This transition enhances their social status and respect within the community.

International Recognition & Acclaim

IMF Lauds PM Mudra

In 2017, IMF praised PM Mudra Yojana by saying that it has been successful in enabling women-led businesses to access finance. To complement PMJDY’s focus on unbanked households, the Pradhan Mantri MUDRA Yojana (PMMY) scheme launched in January 2016, aims to enable access to formal finance for micro, small and medium-sized business by providing collateral-free loans.[5]

Again in 2019 IMF praised the Mudra Yojana and highlighted that Pradhan Mantri Mudra Yojana scheme under the Micro Units Development and Refinance Agency is responsible for developing and refinancing micro enterprises by supporting financial institutions which lend to micro and small business entities engaged in manufacturing, trading and services.[6]

In 2023, IMF said that the PM MUDRA scheme, which extends collateral-free loans with a special focus on women’s entrepreneurship has helped boost the number of women-owned MSMEs, which now stand at more than 2.8 million.[7] In 2024 release it said that an enabling policy environment for entrepreneurship through various programs such as the Pradhan Mantri Mudra Yojana is contributing to increased self-employment and formalization through credit.[8]

State Bank of India (SBI) report

A Decade of Audacious Dreams: Bolder, Bigger and Indeed Beautiful

A recent State Bank of India (SBI) report on Mudra highlights how Mudra has transformed entrepreneurship, especially for marginalized groups, women, and micro-businesses.

A Decade of Growth: Shishu to Kishor Loans

In the past 10 years, Mudra has helped open over 52 crore loan accounts, reflecting a huge surge in entrepreneurial activity. Kishor loans (?50,000 - ?5 lakh), which support growing businesses, have surged from 5.9% in FY16 to 44.7% in FY25, demonstrating a natural progression from micro to small enterprises. The Tarun category (?5 lakh - ?10 lakh) is also gaining traction, proving that Mudra is not just about starting businesses but helping them scale up.

MSME Credit Boom: A Stronger Business Ecosystem

The SBI report highlights a significant rise in credit flow to MSMEs, fueled by Mudra’s impact. MSME lending surged to ?27.25 lakh crore in FY24 from ?8.51 lakh crore in FY14 and is projected to cross ?30 lakh crore in FY25. MSME credit now in FY24 makes up nearly 20% of total bank credit, up from 15.8% in FY14, showcasing its growing role in India's economy. This credit expansion has allowed businesses in smaller towns and villages to access financial support that was once unavailable, strengthening India’s self-reliant economy and job creation at the grassroots level.

Financial Inclusion: Empowering Women & Marginalized Groups

Mudra Yojana has deepened financial inclusion, ensuring that entrepreneurship is not limited to a privileged few. The SBI report reveals that 50% of Mudra accounts belong to SC/ST and OBC entrepreneurs, breaking traditional credit barriers. Nearly 70% of all Mudra beneficiaries are women, highlighting its impact in empowering women-led businesses. 11% of Mudra loan holders belong to minority communities, further ensuring inclusive growth.

In the last nine years (FY25 over FY16), while per woman PMMY disbursement amount increased by a CAGR of 13% to Rs 62,679, the per woman incremental deposits increased by a CAGR of 14% to Rs 95,269 branding PMMY an effective power tool for women empowerment at grass roots level.

States which have higher share of disbursements to women have significantly shown higher employment creation by women-led MSMEs further reinforcing the efficacy of targeted financial inclusion policies in fostering economic empowerment and labour market participation.

Bigger Loans, Stronger Businesses

A telescopic view of the total loans sanctioned/disbursed under the scheme shows that since its launch, the Unique Selling Proposition of PMMY has been well received by diversified intended beneficiary classes, raising the economic clout of the bottom. Average ticket size of the loans have nearly tripled; from ?38,000 in FY16 to ?72,000 in FY23 to ?1.02 lakh in FY25; a beacon of rising economies of scale and deepening of market depth or width. Additionally, loan disbursal grew by 36% in FY23, signaling a strong revival of entrepreneurial confidence.

SBI’s Recent Report Praises Expansion of Mudra Loans

The State Bank of India in its recent report highlighted that under Budget 2025 the announcement of expansion of MUDRA loans for homestays has opened a significant opportunity for small businesses in the tourism sector, with potential loans amounting to Rs 1,500 crore under the Shishu category. The government's initiative aims to boost the local hospitality sector by fostering entrepreneurship in tourism-related businesses.[9]

(A PIB feature)