How Mudra Loans Are Powering the Growth of India’s Micro and Small Enterprises

For India’s 57.7 million micro and small enterprises, the availability of timely and adequate credit has long been a critical challenge. To address this gap, the Government of India launched the Pradhan Mantri Mudra Yojana (PMMY) in 2015 — a watershed initiative aimed at empowering first-time entrepreneurs and small business owners through access to collateral-free loans. Over the past decade, this scheme has become a vital tool in supporting the MSME sector, which plays a central role in employment generation and economic activity.

The PMMY was designed with the intent of “funding the unfunded,” offering financial assistance under three structured categories — Shishu (up to ₹50,000), Kishor (up to ₹5 lakh), and Tarun (up to ₹10 lakh). Each category is targeted at different stages of a business’s growth journey, from initial capital investment and working capital to marketing and expansion needs. In a significant move to support growing enterprises, a fourth category called Tarun Plus was introduced in FY25, providing loans up to ₹20 lakh for existing Mudra borrowers seeking larger credit limits to scale their operations.

One of the most impactful aspects of the Mudra scheme is its role in formalizing the credit landscape for micro and small businesses. By offering customized repayment schedules based on the business’s cash flow and asset cycles, the scheme has reduced dependency on informal and often exploitative credit sources. This not only brings small enterprises into the fold of formal finance but also enhances their creditworthiness over time.

With availability through a vast network of commercial banks, non-banking financial companies (NBFCs), and microfinance institutions, the reach of the scheme has been significant. As of now, over 520 million Mudra loans amounting to ₹22.61 trillion have been sanctioned, reflecting the scheme’s scale, accessibility, and acceptance among small entrepreneurs.

Beyond addressing immediate financial needs, the Mudra scheme is contributing to India’s broader economic goals. By expanding the list of beneficiary businesses and increasing support to MSMEs, it is actively aligned with the vision of making India a $5 trillion economy. As MSMEs continue to drive innovation, employment, and local economic resilience, sustained initiatives like Mudra will remain essential in shaping a more inclusive and self-reliant future.