MUDRA YOJNA

Introduction

Mudra Yojana is a flagship program launched by the Government of India in April 2015 to
promote entrepreneurship and provide financial assistance to small and medium-sized
businesses in the country. The term "Mudra" stands for Micro-Units Development and
Refinance Agency. The primary objective of this scheme is to enable the growth of small
businesses by providing them access to finance from various financial institutions.

The Mudra Yojana scheme aims to offer financial assistance to micro-enterprises and
entrepreneurs through microfinance institutions (MFIs), banks, and other financial institutions.
The program focuses on providing funding to businesses that are engaged in manufacturing,
trading, and service sectors.

The Mudra Yojana scheme is categorized into three types of loans based on the stage of the
business, which are named Shishu, Kishore, and Tarun. Shishu loans are offered to businesses
that are in the initial stages, while Kishore loans are given to businesses that have been running
for some time and require additional funds for expansion. Tarun loans are offered to established
businesses that require a significant amount of funding.

To avail of the Mudra Yojana loan, the borrower needs to approach any of the participating
financial institutions and provide necessary documents like identity proof, address proof,
business registration certificate, etc. The application process is straightforward, and the loans
are sanctioned based on the eligibility criteria and the repayment capacity of the borrower.

The Mudra Yojana scheme has been instrumental in providing financial assistance to small and
medium-sized businesses, especially those in rural and semi-urban areas. The scheme has
helped in creating new jobs, reducing poverty, and increasing economic growth in the country.

Eligibility Criteria

To be eligible for a Mudra loan, the borrower must meet the following criteria:

1. Age: The borrower must be at least 18 years old and not more than 65 years old at the
time of loan application.

2. Business type: The borrower must be engaged in a business activity such as

manufacturing, trading, or services.
 3. Business experience: The borrower must have at least 6 months of experience in the
business activity.

4. Loan amount: The borrower can apply for a loan amount of up to Rs. 10 lahks.

5. Credit score: The borrower must have a good credit score to be eligible for a Mudra
loan.

Terms and Conditions

1. Loan tenure: The loan tenure for Mudra loans ranges from 3 to 5 years.

2. Loan amount: The loan amount ranges from Rs. 50,000 to Rs. 10 lahks, depending on
the stage of the business.

3. Interest rate: The interest rate for Mudra loans is reasonable and depends on the amount
of loan availed by the borrower.

4. Collateral: No collateral security is required for loans up to Rs. 10 lakh.

5. Processing fee: There is no processing fee for Mudra loans.

How to Apply

The application process for Mudra loans is simple and can be done through both online and
offline channels. Here are the steps to apply for a Mudra loan:

1. Identify the lending institution: The borrower needs to identify the lending institution
that offers Mudra loans. The list of participating institutions is available on the Mudra
website.

2. Gather documents: The borrower needs to gather all the necessary documents such as
identity proof, address proof, business registration certificate, and other relevant
documents.

3. Fill the application form: The borrower needs to fill out the Mudra loan application
form with all the relevant details.

4. Submit the application: The borrower needs to submit the loan application form along
with the necessary documents to the lending institution.

5. Loan sanction: The lending institution will process the loan application and sanction
the loan based on the borrower's eligibility criteria and repayment capacity.
Where to Apply

The borrower can apply for a Mudra loan through both online and offline channels. Here are
the details:

1. Online application: The borrower can visit the Mudra website and fill the loan
application form online. The borrower needs to upload the necessary documents and
submit the application form.

2. Offline application: The borrower can visit any of the participating lending institutions
and fill out the loan application form offline. The borrower needs to submit the
application form along with the necessary documents.

Success Rate of Mudra Yojana

The Mudra Yojana scheme has been successful in achieving its objectives of promoting
entrepreneurship, creating employment opportunities, and providing financial assistance to
small and medium enterprises. Here are some of the key success factors of the Mudra Yojana:

1. Increased Access to Credit: Mudra loans have provided access to credit to small
businesses that were previously underserved by the banking system. The scheme has
helped to bridge the gap between the demand and supply of credit in the MSME sector.

2. Boost to Entrepreneurship: The Mudra Yojana has encouraged more people to start their
businesses and become self-reliant. The scheme has played a crucial role in promoting
entrepreneurship, reducing poverty, and boosting economic growth in the country.

3. Flexibility in Loan Repayment: The Mudra Yojana offers flexible repayment options,
which make it easier for small businesses to repay their loans. The repayment tenure
ranges from 3 to 5 years, which helps small businesses to manage their cash flows
better.

4. No Collateral Security Required: Mudra loans do not require any collateral security,
which makes it easier for small businesses to avail of credit. This has been particularly
helpful for businesses that do not have any assets to pledge as collateral.
 5. Online Application Process: Mudra Yojana has a simple and user-friendly online
application process. This has made it easier for small businesses to apply for loans and
has reduced the time and effort required to access credit.

6. High Disbursement Rate: The Mudra Yojana has a high disbursement rate, with over
28 crore loans disbursed since the launch of the scheme. This has helped to create a
large number of employment opportunities and has contributed to the growth of the
MSME sector.

Challenges

There are some challenges and problems in implementing the Mudra Yojana, which need to be
addressed to ensure the long-term sustainability and effectiveness of the scheme. Here are some
of the key challenges:

1. Default Rates: The default rate on Mudra loans is relatively high, which indicates that
some borrowers are facing difficulties in repaying their loans. This is a concern for the
lending institutions and could impact the long-term viability of the scheme.

2. Lack of Financial Literacy: Many small businesses lack financial literacy, which makes
it difficult for them to manage their finances effectively. This could lead to a higher
default rate and could impact the overall success of the scheme.

3. Limited Reach: The Mudra Yojana has not been able to reach all the small businesses
in the country, particularly those in remote and rural areas. This is due to the limited
network of lending institutions and the lack of awareness about the scheme among
potential borrowers.

4. Inadequate Funding: The Mudra Yojana has been allocated limited funds, which could
limit the amount of credit that can be extended to small businesses. This could impact
the growth of the MSME sector and could limit the impact of the scheme.

5. Dependence on Lending Institutions: The success of the Mudra Yojana is dependent on

the willingness and ability of the lending institutions to extend credit to small
businesses. This could be impacted by various factors such as the financial health of the
lending institutions, regulatory constraints, and market conditions.
Conclusion

In conclusion, the Mudra Yojana has been successful in providing financial assistance to small
businesses and promoting entrepreneurship in the country. However, some challenges need to
be addressed to ensure the long-term sustainability and effectiveness of the scheme. With its
flexible loan options, reasonable interest rates, and easy application process, the scheme has
helped many entrepreneurs realize their dreams of starting and expanding their businesses. The
program has played a crucial role in promoting entrepreneurship, reducing poverty, and
boosting economic growth in the country. The scheme has made it easier for small businesses
to access credit and has encouraged more people to start their businesses. The government and
the lending institutions need to work together to address these challenges and to ensure that the
Mudra Yojana continues to support the growth of the MSME sector in the country.