A Study of Performance of PMMY among MSMEs in Promoting Financial Inclusion

An economy as vast as India, with a population exceeding 1.25 billion, cannot thrive without a robust presence of small, medium, and micro enterprises that generate employment opportunities for its rapidly growing population. At present, these small, micro, and medium-scale enterprises already employ more than 20% of India's workforce. Consequently, it becomes crucial to provide government support to these MSME in the form of loans, training, exposure, and marketing assistance for their products. Small businesses and micro-enterprises encounter several challenges, such as lack of information, financial illiteracy, restrictive entry-level policies, high operational costs, inadequate infrastructure, limited financial access, and technological barriers. In recognition of these obstacles, the Government of India introduced MUDRA loans in 2015, offering collateral-free loans to support these enterprises and ensure financial literacy. The scheme has been very active in disbursing loans to the MSME sector, with over 93% of the loans granted being below Rs. 50,000. Given these circumstances, it becomes imperative to conduct a comprehensive study and review the performance of the Pradhan Mantri Mudra Yojana (PMMY) to understand the success rate of this policy and its contribution towards financial inclusion. While the Mudra scheme has shown considerable success in all states, there is still a need for further efforts to ensure financial inclusion across all segments of the population.