Abstract
The Government of India has recently launched a range of macroeconomic policy initiatives which are innovative as well as transforming also. Launching of Micro Units Development and Refinance Agency (MUDRA) bank on 8th April, 2015 with an aim to look forward to the development of small entrepreneurs is one of them. The main objective of this initiative is to empower Non-Corporate Small Business Sector (NCSBS), fulfil the financial needs of approximately 5.77 Crore small businesses spreading throughout the country as well as to create as many microfinance institutions (MFIs) as possible. Crossing the main objective of microfinance, the MUDRA BANK is targeting Funding the unfunded as a Last Mile Financiers. In most of the developing countries, financing to the poor through formal financial services failed to meet the requirements. The high risk as well as high transaction costs associated with small loans and savings deposits are the factors which make them vulnerable. It is also estimated that in developing countries, the formal financial system reaches on an average to only top 25% of the economically active population and leaves the bottom 75% without access to financial services. India is not an exception on this front. GOI through this initiative has indicated to lend a loan up to Rupees 10 lakh in three categories, viz, Shishu, Kishor and Tarun through MUDRA Bank. The National Bank for Agriculture and Rural Development (NABARD) will closely monitor the progress of this policy. If implemented in right spirit, this policy initiative has the power to bring revolutionary changes in the Indian economy. This study tries to find out what is new in this initiative and its future prospect after initiation.
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Notes
- 1.
Grameen Bank was originally sponsored by the central bank of Bangladesh and some state owned commercial banks and foreign donor institutions. It was subsequently made into an independent banking organisation through government legislation. For a major part from its inception, Grameen Bank relied on funds from foreign donors. However, since 1995, Grameen Bank claims to have become self-reliant and does not rely on foreign funds.
- 2.
He gave a small loan of 856 Taka ($27) from his pocket to 42 poor bamboo weavers and found that small loans radically changed the lives of these people and they were able to pay back the loans with interest.
- 3.
Such as Foundation for International Community Assistance (FINCA), Americans for Community Cooperation in Other Nations (ACCION), Freedom from Hunger, Opportunity International, Co-operative for Assistance and Relief Everywhere (CARE), Consultative Group for Assisting the Poor (CGAP), etc.
- 4.
For example susus in Nigeria and Ghana (15th century), Chit funds, Rotating Savings and Credit Associations (ROSCAs) and Self-Employed Women’s Association of India (SEWA) in India, Tontines in West Africa, Pasanaku in Bolivia, Hui in China, Arisan in Indonesia [Bank Rakyat Indonesia, BRI, now one of the largest Microfinance Institutions (MFIs) of the world] (Schwiecker 2004), Paluwagan in Philippines etc. In Europe it has started in Ireland (1720) and Germany (1847) (Seibel 2005).
- 5.
Some of the examples are Bank Rakyat Indonesia (BRI) in Indonesia, Bancosol in Bolivia, Bank for Agriculture and Agricultural Co-operatives (BAAC) in Thailand, Grameen Bank and Bangladesh Rural Advancement Committee (BRAC) of Bangladesh, NABARD in India, Amannah Ikhtiar Malaysia (AIM) of Malaysia, Agriculture Development Bank of Nepal (ADBN), K-Rep in Kenya and Mibanco in Peru are the few have yielded encouraging results in alleviating poverty and empowering the poor through microfinance (Schwiecker 2004).
- 6.
Such as savings, deposits, loans, payment services, money transfers, insurance etc.
- 7.
This trade union established their bank known as SEWA Bank in 1974.
- 8.
In 1996, RBI has instructed to banks to promote this programme further to cover SHG financing as a mainstream activity in their priority sector-lending portfolio.
- 9.
The NGOs that support the SHGs include MYRADA in Bangalore, Self-Help Women’s Association (SEWA) in Ahmadabad, PRADAN in Tamil Nadu and Bihar, ADITHI in Patna, SPARC in Mumbai. The NGOs that are directly providing credit to the borrowers include SHARE in Hyderabad, ASA in Trichy, RDO LOYALAM Bank in Manipur etc.
- 10.
For example IRDP (Integrated Rural Development Programme), TRYSEM (Training of Rural Youth for Self-Employment), DWCRA (Development of Women and Children in Rural Areas), SITRA (Supply of Improved Toolkits to Rural Artisans), GKY (Ganga Kalyan Yojana) and MWS (Million Wells Schemes) etc.
- 11.
There are 5.77 Crores of small business units that are mostly individual proprietorships, running small manufacturing and training business, out of that 66% of these are owned by Scheduled Caste, Scheduled Tribes and Other Backward Castes (NSSO 2009).
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Roy, M. (2018). MUDRA: The Transformation of Microfinance in India: Review, Experiences and Future Prospect. In: Bhanumurthy, N., Shanmugan, K., Nerlekar, S., Hegade, S. (eds) Advances in Finance & Applied Economics. Springer, Singapore. https://doi.org/10.1007/978-981-13-1696-8_6
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