Financial Inclusion by Design: A Policy Analysis of MUDRA Yojana's Formulation, Implementation, and Outcomes

Abstract India's Micro, Small and Medium Enterprises sector drives nearly a third of the country's Gross Value Added, yet as recently as 2015 almost 90% of these businesses had no access to formal credit. The Pradhan Mantri Mudra Yojana (PMMY), launched that year to fund this "unfunded" segment through collateral-free loans, has since grown into one of the world's largest micro-credit interventions — sanctioning over 52 crore loans worth more than ₹32–35 lakh crore in a decade. This study traces PMMY's policy design, its four-tier loan structure (Shishu, Kishore, Tarun, and the recently added Tarun Plus), and its performance from 2015-16 to 2024-25, drawing entirely on secondary data from official annual reports and peer-reviewed literature. The analysis finds a clear shift from micro-lending toward larger Kishore and Tarun loans, alongside strong inclusion of women (68–71% of accounts) and SC/ST/OBC borrowers (~50% of accounts). However, it also uncovers a persistent gap: these groups hold a disproportionate share of accounts relative to the credit value they actually receive, suggesting concentration in entry-level loans rather than genuine graduation to higher tiers.