Has the Indian Government’s Microloan Scheme Been Successful?
The government’s micro loan scheme, going by the moniker Pradhan Mantri Mudra Yojana, has disbursed Rs1.53 trillion worth of loans so far in 2016-17, which represents a 15.04% growth from the previous fiscal year. Recall that in fiscal year 2016 (FY16), when the scheme was first implemented, disbursements had exceeded the target specified by that year’s budget.
Buoyed by the success of FY16, the government had set a target of Rs2.44 trillion for disbursements this year. But with just a week left for the year to end, disbursements are just 62% of the target for the current year. But is this reason enough to label the scheme unsuccessful? To be fair, we can say the government’s target was lofty since it was over 80% higher than last year’s actual disbursals.
But dig a bit deeper, and the sheen continues to wear off. Let us look at the performance of the banks, the real anchors of the scheme. Data from the Reserve Bank of India (RBI) shows that the banking sector’s micro and small loan disbursals stood at Rs8.3 trillion as of January. Notwithstanding the refinance and credit guarantee support that the Micro Units Development and Refinance Agency (Mudra) provides to banks and the existing mandate to lend under priority sector, the micro and small loan portfolio of the banking sector has barely grown in the last one year.