MUDRA: The Transformation of Microfinance in India: Review, Experiences and Future Prospect

  • Manas RoyEmail author


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.




  1. Adams, D. W., Graham, D. H. & Von, Pischke. J. D. (1984). Undermining rural development with cheap credit. Boulder, Colorado, USA: Westview Press.Google Scholar
  2. Adams, D. W., & Vogel, R. C. (1986). Rural financial markets in low-income countries: Recent controversies and lessons. World Development, 14, 477–488.CrossRefGoogle Scholar
  3. Asian Development Bank. (2000). Finance for the poor: Microfinance development strategy, Manila.Google Scholar
  4. Akula, V. (2008). A fistful of rice. Boston: Harvard Business Review Press.Google Scholar
  5. Chavan, P., Birajdar, B. (2009). Micro finance and financial inclusion of women: An evaluation. RBI occasional papers, Vol. 30, No. 2.Google Scholar
  6. Hulme, D., Paul, M.(1996). Finance against poverty. (Vol. I). London: Routledge Publications.Google Scholar
  7. Jayaraman, B. (2001). Micro finance: Retrospect and prospects. Occasional Paper, No. 20, NABARD.Google Scholar
  8. Micro financial sector development and regulation bill. (2007). Bill No. −41, introduced by the Union finance minister in Lok Sabha on March, 20.Google Scholar
  9. NABARD. (2008). State of micro finance in India, 2006–07, Mumbai.Google Scholar
  10. NABARD. (2011). Progress of SHG-Bank linkage in India, Chapter IV.Google Scholar
  11. NSSO. (2009). Report on Employment and Unemployment among the Social Groups, 66th Round. GOI: Ministry of Statistics and Programme Implementation.Google Scholar
  12. Pillai, A. (2011). Status of microfinance in India. International Journal of Marketing, Financial Services and Management Research 1.Google Scholar
  13. RBI speeches. (2007). What RBI means to the common person. Lecture delivered by Dr. Y. V. Reddy, Governor, Reserve Bank of India at Karamchedu Village, Ongole District, Andhra Pradesh, February 18.Google Scholar
  14. Schwiecker, S. (2004). The impact and outreach of microfinance institutions: The effect of interest rates. Master’s Degree Thesis, University of Tubingen, Germany.Google Scholar
  15. Seibel, H.D. (2005). Does history matter? The old and the new world of microfinance in Europe and Asia. From moneylenders to microfinance—Southeast Asia’s credit revolution in institutional, economic and cultural perspective. In An Interdisciplinary Workshop, Asia Research Institute, Department of Economics and Department of Sociology, National University of Singapore, October, 7–8.Google Scholar
  16. The New York Times. (1997). Micro loans for the very poor. Editorial, February 16.Google Scholar
  17. Thirumaran, S., & Selladurai, M. (2013). An analysis of poverty eradication measure in India. Indian Journal of Applied Research, 3(2).Google Scholar
  18. World Bank. (1989). World development report. New York: Oxford University Press.Google Scholar
  19. Women’s World Banking. (1995). The missing links: Financial systems that work for the majority. New York.Google Scholar

Copyright information

© Springer Nature Singapore Pte Ltd. 2018

Authors and Affiliations

  1. 1.Faculty of Arts and Law, Department of Economics, School of Humanities & Social SciencesManipal University JaipurJaipurIndia

Personalised recommendations