MUDRA Scheme: A Game Changer Initiative on Job Creation

Modi Government Generates 5.5 Crore Jobs Through Mudra Loans. Incremental Job generation due to PMMY pegged at 1.7 crore in two years.

01 October, 2017 Special Reports, Economy
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  • Total number of jobs generated due to <10L MUDRA loans are 5,44,79,763.
  • Sum total of incremental, direct and indirect jobs generated through acceleration provided by Pradhan Mantri MUDRA Yojana: 16,843,070.
  • Out of the total jobs created, 47.77 per cent were created under the SC, ST and OBC sections.


Job creation, unarguably, is one of the most critical issues facing not only the Indian economy but also the world as a whole. Job creation is critically important not only from an economic point of view but it also has a wider impact on social indicators such as health and education, and even law and order. Several governments have been voted in on the promise of jobs and voted out of the power if this promise is not met. The Bharatiya Janata Party (BJP) led NDA alliance also won the 2014 Indian general election with a thumping majority on the promise of according a high priority to job creation. Prime Minister Narendra Modi’s government has been working on several fronts to create employment opportunities, as has been the case with previous governments.

However, the Pradhan Mantri MUDRA (Micro Units Development and Refinance Agency) Yojana, introduced in April 2015, is proving to be a game changer. Why do we call it a game changer? This is because the impact it has had on promoting entrepreneurship and job creation is impressive.

As there is no official data available on the impact of the MUDRA scheme on the job market, Skoch Group decided to conduct a ground level study. We have analysed primary data collected from Micro Units Development and Refinance Agency (MUDRA), banks, financial institutions and also beneficiaries of the scheme. The findings show interesting results.

As there is no official data on MUDRA scheme’s impact on job market, SKOCH Group decided to do a ground level work on it. We have analysed the primary data collected from Micro Units Development and Refinance Agency (MUDRA), banks and financial institutions and also from the beneficiary of the scheme.”

The MUDRA Yojana has really been the biggest, and one of the most cost effective tools, for job creation. Our research and ground level analysis show that around 5.5 crore jobs have been created in the two years which have passed since the initiation of the scheme. This should be music to the ears of all policymakers’ as there have been huge debates on whether India is witnessing a jobless growth. Traditional data on unemployment indicates that the Modi government has not been able to make any headway in job creation. As per the 5th Annual Employment-Unemployment Survey Report published by Ministry of Labour, the unemployment rate in India stood at 5 per cent in 2015-16, marginally higher than the 4.9 per cent recorded in 2013-14. The survey includes data both from formal and informal parts of the economy, as well as those working as casual workers in public works programmes.

However, are we getting a correct picture of the employment scenario through this data? We need to look beyond! Small entrepreneurs, notably at the village level, who have been the biggest beneficiaries of the MUDRA Yojana, create jobs which laregely go unnoticed in traditional economic analysis and surveys. Moreover, employment doesn’t necessarily mean holding a formal job. Self-employment is equally important, if not more. The MUDRA Yojana is focused on creating and helping small entrepreneurs. This scheme has successfully created an ecosystem of entrepreneurs at the ground level. Moreover, the disbursement of loans to small entrepreneurs through this scheme has had a multiplier effect on job creation. So far, Rs 3.42 lakh crore of MUDRA loans have been provided to over 8 crore people, most of whom are small entrepreneurs. A majority of these people were not previously involved in any business activity. MUDRA loans are available for non-agricultural activities upto Rs 10 lakh. Activities allied to agriculture such as dairy, poultry, bee keeping etc, are also covered. So the beneficiaries are not from agriculture sector.

Another noteworthy thing about the MUDRA scheme is that it is inclusive. Its focus has been on the underprivileged section of the society. Nearly half of the beneficiaries under the scheme belong to underprivileged class. This includes 20 per cent from Scheduled Caste category, 5 per cent from Scheduled Tribe category and 35 per cent from Other Backward Classes. Over 70 per cent beneficiaries are women. This clearly indicates that the scheme is well targeted. Lending under MUDRA scheme has been higher than the government targets and projections. Beating targets is an achievement and bodes well sign for any scheme, as is the case with MUDRA. However, it also poses a challenge. High disbursements have been made by government-run banks and financial institutions. This might have been done to meet targets. As the loans are collateral free, a proper risk evaluation is crucially important. The success of the scheme in the longrun will largely depend on proper risk evaluation and management.

Why This Report?

There are various estimates and multiple sources of statistical data available on jobs and unemployment in India. Even different government departments present different estimates of the country’s unemployment scenario. The Labour Bureau of the Ministry of Labour and Employment releases job related data through its Annual Employment- Unemployment Survey. The Census of India – conducted every 10 years – also releases data on unemployment. We also get similar data through the National Sample Survey Office (NSSO) and the annual Economic Survey reports of the Ministry of Finance. Industry lobby groups and several private and non-government institutions also independently release data on jobs. But there are significant gaps in all of these as none of them present a comprehensive picture in a timely manner.

The problems are on both fronts. One, the data is not released in a timely manner and the second, they are not comprehensive and thus do not present a true picture. Most of the data released by the government has a time lag of two-three years, or even more. For instance, the 4th Annual Employment-Unemployment Survey report released in early 2016 was based on a survey conducted by the Labour Bureau during the period of January 2014 to July 2014. The field work for the latest Fifth Annual Employment- Unemployment Survey was done between April 2015 and December 2015. Therefore, there is a time lag in these reports of around two years. Census data on the other hand takes even longer.

“MUDRA scheme is focused on creating small entrepreneurs. The scheme has successfully created an ecosystem of entrepreneurs at the ground level. Moreover, it is having very impactful multiplier effect on job creation. So far Rs 3.42 lakh crore MUDRA loan have been provided to over 8 crore people, mostly small entrepreneurs.”

Moreover, there is no consistency in the data released by even various government departments, let alone other sources. As per the 4th Annual Employment-Unemployment Survey report of the Labour Bureau, the unemployment rate stood at 4.9 per cent nationally with a rate of 4.7 per cent recorded in rural areas, and 5.5 per cent in urban areas. As per the 5th Annual Employment-Unemployment Survey the unemployment rate rose to 5 per cent nationally with rural sector unemployment at 5.1 per cent and urban sector unemployment at 4.9 per cent.

According to the NSSO on the other hand, the unemployment rate stood at 2.7 per cent. This included 2.3 per cent for rural areas and 3.8 per cent for urban areas. (

According to the latest International Labour Organisation (ILO) report, unemployment rate in India stood at 3.5 per cent in 2016 and it is expected to decline marginally to 3.4 per cent in 2017. However, in absolute terms the number of unemployed people is expected to rise to 18 million by 2018 from 17.7 million in 2016. As per the ILO’s World Employment and Social Outlook report released in May 2017, the global unemployment rate is expected to rise modestly from 5.7 to 5.8 per cent in 2017 as the pace of labour force growth outstrips job creation.

There are several gaps and inconsistencies in these unemployment estimates. The Fifth Annual Employment-Unemployment Survey report is based on a total sample of 156,563 households. It includes 88,783 households from rural India and 67,780 households from urban India. Persons aged 15 years and above who are willing to work are covered in this survey. The current methodology is unsuitable for measuring underemployment, disguised employment, and the seasonality of labour force. Likewise, it also does not capture the effects of migration on employment.

The government has also admitted that the available data on employment generated through different sources is not timely and reliable. In fact, the Modi government has set up a task force headed by NITI Aayog Vice-Chairman to formulate a methodology to generate timely and reliable employment data.

SKOCH Group has been studying financial inclusion from its very inception and has concluded several times that Public Sector Banks (PSBs) have focused on bigger ticket lending to a small number of customers.The MUDRA Yojana has brought about the first major change by including MFIs and NBFC MFIs in its fold – and their outstanding performance at the bottom of the pyramid under this scheme is a testimony to that fact. Whichever box you tick, the fact is that there has been an enormous focus brought in on livelihood-linked credit—irrespective of who the lender is. Rather than the absolute amount disbursed, a better way to analyse the success of MUDRA is to look at the number of beneficiaries. No scheme since independence has been able to benefit so many people in such a small amount of time.

This report by SKOCH Group is an attempt to fill gaps in the timely and reliable reporting of data on employment. True, the task is humongous. So, we are not claiming that this is going to fill all the gaps. This report focuses on job linkages to a specific scheme – MUDRA. There is no official data on it. So, this report is definitely going to a trailblazer as far as the MUDRA scheme’s linkage to job creation is concerned.


This report is based on primary data collected from Micro Units Development and Refinance Agency Ltd (MUDRA Ltd), banks, financial institutions and beneficiaries of the scheme. Data available with MUDRA, banks and financial institutions primarily pertains to the opening of accounts and the quantum of loan disbursal. They do not capture any numbers on employment generation.

SKOCH conducted a survey amongst beneficiaries to gauge the impact of MUDRA loans on job creation. We took into consideration direct employment as well as indirect employment generated with a particular amount of disbursed loan.

We approached various stakeholders, especially Public Sector Banks (PSBs) to collect data on job creation. While PSBs worked in conjunction with their zonal heads and respective branches to collect this data, SKOCH worked simultaneously, following the expert route and with Community Based Organisations (CBOs) conducting field surveys and holding focus group discussions to assess the impact. The effort was to go down to the bottom most layer and contact direct beneficiaries to understand the real situation on the ground. The data thus gathered by five major PSBs, namely State Bank of India, Punjab National Bank, Vijaya Bank, Corporation Bank and Union Bank of India, in addition to SKOCH’s own research and survey, provided us with real-time data. These major banks hold a 5.76 per cent share of total MUDRA accounts opened between April 2015-June 2017.

In addition to this, SKOCH’s own time-line research and data, collected as a result of conducting periodic financial and digital literacy awareness programmes for Village Level Entrepreneurs (VLEs), enabled feedback through a reliable fieldbased mechanism. Collaboration with CBOs provided a grassroots level input to re-assess the data as much as the whetting and insight from experts at every level of research.

SKOCH has therefore attempted to explore this very crucial aspect of the MUDRA Yojana, which has paved the way for creation of jobs that the country desperately needs. This exercise hopes to provide answers to questions such as where are the jobs in India? Why is there so much hype given to MUDRA? How many jobs have really been created under this scheme? It is to be noted that SKOCH has been actively studying the impact of the MUDRA Yojana right from its inception and has already published several reports on its success.

Methodology for Deriving Job Data

The overall data on the number of bank accounts opened, under MUDRA scheme, between April 2015 and June 2017 is segregated on the basis of performance by States and Financial Institutions. The data on job generation that we have gathered from 5 major PSB’s was analysed and segregated on the basis of jobs generated per scheme between the period of April 2015-June 2017. To reach a final number of jobs created nationwide through MUDRA in the same timeframe, we applied the conversion rate of jobs created per 100 accounts. We applied this on national MUDRA data for accounts opened.

Process Flow

  1. MUDRA Ltd was approached to obtain overall performance data of PMMY.
  2. Public sector banks were approached to provide data on their MUDRA performance and jobs generated.
  3. Banks spoke to their divisions who in turn spoke to a cross section of branches. The branches approached a number of loan beneficiaries to estimate jobs created across each category of loan.
  4. Based on loans and category-wise job averages, banks submitted their national job generation figures to us.
  5. The participating banks were:
    • State Bank of India
    • Punjab National Bank
    • Union Bank of India
    • Corporation Bank
    • Vijaya Bank
  6. Together they represent 5.76 per cent of total accounts opened nationally and a 19.19 per cent share of amount disbursed.
  7. Extrapolating their average job generation category-wise to cumulative category-wise accounts opened nationally, we arrived at the number of direct jobs created nationally.
  8. Through direct discussions with field based organisations, bankers and loan beneficiaries, we arrived at the multiplier for indirect jobs created per direct job category-wise. The multipliers are as follows:
Scheme Indirect jobs per Direct job
a. Shishu 0.25
b. Kishore 1
c. Tarun 2

Brief Overview Of Mudra Scheme

Prime Minister Narendra Modi launched Pradhan Mantri MUDRA Yojana (PMMY) on 8 April 2015 with an objective to provide access to institutional finance to small business units and entrepreneurs in the country. The Micro Units Development and Refinance Agency Ltd (MUDRA) was set up through a statutory enactment. It is responsible for developing and refinancing through PMMY, all MFIs, which are in the business of lending to micro/small business entities engaged in manufacturing, trading and service activities. MUDRA has partnered with State/Regional level coordinators to provide finance to last-mile financiers of small/micro business enterprises. Further, the approach goes beyond credit only approach and offers a credit  plus solution for these enterprises spread across the country. (

We have to be very clear that MUDRA is not a government grant. This is a scheme run on commercial considerations. The PMMY is a demand driven scheme, and all loans proposals are considered on commercial merits.

The loans are extended under the MUDRA scheme by banks and Micro-Finance Institutions (MFIs) in three categories:

  • Shishu (loans upto Rs 50,000);
  • Kishore (loans from Rs 50001 to Rs 5 lakh);
  • Tarun (loans from Rs 5 lakh to Rs 10 lakh)

The names ‘Shishu’, ‘Kishore’ and ‘Tarun’ signify the stage of growth/development and funding needs of a micro business unit and entrepreneur. It also provides a reference point for the next phase of graduation/growth for the entrepreneur to aspire for. The type of businesses covered under the scheme is quite comprehensive. It includes proprietorship/partnership firms running as small manufacturing units, shopkeepers, fruits/vegetable sellers, hair cutting saloon, beauty parlours, transporters, truck operators, hawkers, co-operatives or body of individuals, food service units, repair shops, machine operators, small industries, artisans, food processors, Self Help Groups (SHGs), professionals and service providers etc in rural and urban areas with financing requirements upto Rs 10 lakh.

The three primary factors, which led to the introduction of PMMY are:

  1. The favourable climate of MSME sector;
  2. The financial inclusion of the vulnerable groups; and,
  3. Setting up a catalyst, which will drive both direct and indirect employment generation.
“Another noteworthy thing about the MUDRA scheme is that it is inclusive. Its focus has been on the underprivileged section of the society. Nearly half of the beneficiaries under the scheme belongs to underprivileged class.”

The informal sector constitutes nearly 93 per cent of the Indian work force and is mostly unorganised, where a majority works in pitiable conditions, lacking basic labour standards, absence of written job contract, paid leave, social security with little or no access to trade unions. Before 1991, there were two kinds of industries that existed in India, i.e., large and small (largely unorganised). In the case of small scale Industries, they were not required to register mandatorily. For instance, according to the MSME census, out of 36.17 million MSMEs, the registered MSME segment comprises of merely 1.54 million units, whereas the remaining 96 per cent of the MSMEs were found to be unregistered informal sector. In addition, of these 1.54 million MSMEs almost 95 per cent are ‘micro’, 4.8 per cent are ‘small’ and 0.2 per cent are ‘medium’. On the other hand, if both the registered and unregistered MSME are taken into account, the ‘micro’ units engaged in manufacturing, processing, trading and services make the broad base providing employment outside agriculture and collectively referred to as the Non-Corporate Small Business Sector (NCSBS). More importantly, 94 per cent of these ‘micro’ enterprises, are Own Account Enterprises (OAEs) run by individuals belonging to financially weaker segment comprising of SCs, STs or OBCs. The loans to start or continue their business comes mostly from the local moneylenders, friends and relatives and they face enormous challenges to access formal credit system, despite having maximum job potential. Therefore, it became imperative to provide access to credit for these vulnerable groups and entrepreneurs who had zero or little access to formal sources of funding.

Mudra: The Journey So Far

The achievements of the MUDRA scheme have gone beyond expectations and made a substantial difference at the ground. The total number of loans advanced under the scheme has reached 8.7 crore till August 13th, 2017. Small women entrepreneurs and business units run by women are the biggest beneficiaries of the scheme.

Under the Mudra Yojana, since inception till August 13th, 2017 – out of the total 8.7 crore loans distributed, 6.56 crore were given to women. A total amount of Rs 3.75 lakh crore amount was sanctioned under the scheme, out of which Rs 1.88 lakh crore went to women. Total sanctioned amount under the scheme stood at Rs 3.63 lakh crore, out of which Rs 1.66 lakh crore was loaned to women. The target for the financial year 2016-17 was Rs 180,000 crore, while the actual sanctioned amount exceed the target rising to Rs 180,528 crore, which indicate the success of the scheme.

Under the MUDRA scheme banks have been mandated by the Reserve Bank of India (RBI) not to insist for collateral security in the case of loans of up to Rs 10 lakh extended to the units in the MSME sector.This has enabled persons from humble and poor backgrounds to avail MUDRA loans. For enabling smooth functioning in the budget for FY2015- 16, a separate Credit Guarantee Fund was created for MUDRA loans, with an initial corpus of Rs 3,000 crore. The National Credit Guarantee Trustee Company (NCGTC), a subsidiary of SIDBI managing various credit guarantee funds, is the implementing agency for MUDRA Credit Guarantee Scheme. Moreover, a rigorous credit appraisal, which ensures that loss does not fully fall on the lender but only 50 per cent is borne by the lender and the rest varies on the lender’s rating and NPA performance. Through periodic awareness campaigns and stakeholder meetings, MUDRA imparts customer literacy on the demand-side and advocates use of technology on the supply-side.

A total of 27 Public Sector Banks, 17 Private Sector Banks, 31 Regional Rural Banks, 4 Co-Operative Banks, 36 Micro-Finance Institutions and 25 Non-Banking Financial Institutions have currently been allowed to disburse MUDRA loans. Nearly 60 per cent of the loans under this scheme are set to be offered through the ‘Shishu’ option and the rest 40 per cent are to be done through ‘Kishore’ and ‘Tarun’ schemes.

Figure 1 depicts loan-wise details where during the year 2015-16, the total number of MUDRA accounts opened was 3,48,80,924, out of which, Shishu loans were availed by 3,24,01,046. In the year 2016-17, the total number of MUDRA accounts opened was 3,97,01,047, out of which Shishu’s share was 3,64,97,813. During April-June 2017 (FY2017-18) a total of 79,97,654 accounts were opened out of which 73,77,121 were Shishu accounts.

The second year 2016-17 saw certain pertinent changes such as the focus of the Central Government towards scaling MUDRA loans in backward districts to reach the unreached and mainstreaming the micro-enterprises involved in activities allied with agriculture within the ambit of PMMY loans. Moreover, the overdraft amount of Rs 5,000 sanctioned under PMJDY is also treated as part of MUDRA loans under PMMY.

Figure 2 depicts the major categorywise accounts opened from 2015 till June 30, 2017. A total of 8,25,79,625 accounts were opened cumulatively, out of which 4,59,21,086 belong to vulnerable groups comprising of SCs, STs and OBCs, which is more than 50 per cent. Although the figures for 2017 are for a quarter, the trend seems to be relatively good and is expected to move higher in the coming months as the budget earmarked for the current fiscal is Rs 60 lakh higher in comparison to the last fiscal.

Two of the important sections within the vulnerable groups are women and minorities. It is to be noted that India has one of the lowest female labour force participation rates in the world, ranking 120th among the 131 countries and only 27 per cent of women, 15 years or older, are working or actively looking for a job. Therefore, a scheme, which pays special attention to job creation among women and promotes entrepreneurship is of extreme eminence. MUDRA is one of the schemes where so far 6,17,08,198 accounts have been opened for women, which is nearly 75 per cent of the total accounts opened so far under MUDRA scheme. This is one of the remarkable achievements of MUDRA. Even for accounts belonging to minorities the number stood at an impressive 1,00,47,235.

The magnitude of bank loans disbursed to unfunded and underfunded segments is an indicator of the emergence of this category of borrowers as a key driver of demand for credit. It is important to glance the overall account opening under the three different categories bankwise since 2015. For 2015-17, the total number of bank accounts has shown a steady increase especially in the Shishu category. The total number of bank accounts opened so far under Shishu stands at 7,6

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