MUDRA: Financial Inclusion of the missing middle

Dr Saloni Gupta

Volume : V, Issue : XI, November - 2015

MUDRA: Financial Inclusion of the missing middle

Dr Saloni Gupta

Abstract :

 The biggest bottleneck to the growth of entrepreneurs in the Non–Corporate Small Business Sector (NCSBS) is the lack of financial support to this sector. Majority of this sector does not have access to formal source of finance. Government of India has set up Micro Units Development & Refinance Agency Ltd. (MUDRA) for catering to the needs of the NCSBS segment (or the informal sector) for inging them in the financial mainstream. Till such time as the enactment creating MUDRA Bank is complete, it is being set up as a subsidiary of SIDBI which has been supporting India’s small scale industry since last 25 years. It is set up for development and refinancing activities relating to micro units. It is envisaged that it will benefit small entrepreneurs and will also act as a regulator for ‘MicroFinance Institutions (MFIs). The MUDRA bank will cater to 5.75 crore small business units that are spread all across India who currently find it difficult to access credit from the regular banking system. Mudra Bank will partner with local coordinators and provide finance to "Last Mile Financiers" of small/micro businesses. It is envisaged that the measures to be taken up by MUDRA are targeted towards mainstreaming educated youth, skilled workers and entrepreneurs, apart from NCSBS, who lie between the large industrial credit seekers at one end and very poor small borrowers like low income households, farmers and migrant work force at the other end of financing spectrum. Thus, MUDRA bank hopes to facilitate financial inclusion of the missing middle, through refinance and development support.