Numerous facilities have been provided for large corporations but small. Mudra is the key to success to small entrepreneurs who are as of now, the biggest cogs in the wheels of business to help the economy grow.
It is difficult for these enterprises to get finance from scheduled bank. Since they follow rigid norms and have stringent scrutiny. This defeats the whole notion of refinance through SIDBI. Only mere 4% of these businesses are able to receive loans for their business. Rest of them are forced to take a loan through indigenous money lenders. The main objective of the scheme of MUDRA is to financially support small scale entrepreneurs of the backward and low economic classes.
The principal objectives of the MUDRA Bank are:
- To regulate the borrower and the lender of the microfinance and to stabilize the microfinance scheme through inclusive participation and firm regulation.
- Make a record of all MFIs and launch a system which rates its performance along with accreditation. This will help the financing borrowers to evaluate and address the MFIs which meet their requirements and whose past record is the most convincing. This will lead to competitive sprite in the MFIs. Hence to attract borrowers they will do their best. Here the ultimate winner will be the borrower.
- MUDRA will be responsible to make a pavement and frame guidelines for the borrowers; non-appreciative steps will be avoided and corrective measures will be taken on time. It will also lay down acceptable norms to be followed in case any lender isn’t able to recover money.
- Create standardized agreements that will shape the functioning of the last mile business in the future.
- Provide credit guarantee scheme to offer guarantees to loans rendered to small businesses.
- Conducting appropriate and advance technologies to accelerate the process of fast and efficient borrowing, lending and to record distributed capital.
Credit Plus Approach
Some of the highlights of proposed initiative involve encouraging financial literacy, supporting and maintaining grass root institutions and development of framework for Small Business Finance Entities.
MUDRA will be developed by experienced existing players who have skills to build thriving financing ecosystem for the last mile lenders and borrowers. The segment of Non Corporate Small Business shall flourish in healthy environment and thus refinancing with regular ROI will increase the customer value if MUDRA and create confidence and trust among people to expand their business. Establishment of MUDRA will also increase the number of people to access financing, who were rejected by commercial or rural banks. This goes beyond the single minded approach of credit financing, it is the solution to create a financially sound ecosystem across India.
How can Mudra yojna make a difference?
People living in interior parts and rural India do not majorly enjoy the benefits of formal banking. Thus, they were always deprived of having access to credits, insurance, loans and other financial instruments that might help them grow their business. This led them to depend on the local money lenders which come with high interest and unbearable conditions, falling them in a debt-trap for many generations.
If our country and government could harness this, offer some guidance, training, support and financial assistance, there can be a potential rise in the GDP of the country. MUDRA initiative will lay its foundations on the conditions of the underprivileged people and try to reach the interiors of our nation.
Mudra Bank can prove to be a game changer for thousands of individuals to set up their own business, some of whom may go far international some day. This initiative is better than providing subsidy.