10 Years Of PM Mudra Yojana: Bringing Formal Credit, Micro Entrepreneurship To Unbanked Population

As the Pradhan Mantri Mudra Yojana (PMMY) completes a decade in April 2025, this micro-credit program has reached another milestone, having sanctioned over 520 million loans worth Rs 32.61 lakh crore since its inception.

Designed to facilitate non-agricultural, non-corporate small and micro enterprises, the scheme has helped improve financial inclusion of women, scheduled castes (SCs), scheduled tribes (STs), and other backward classes (OBCs) to a great extent.

PMMY loans were initially launched to make easy collateral-free loans of up to Rs 10 lakh available. Rebadged as Mudra loans, they have provided access to formal credit to first-time borrowers and micro entrepreneurs.

According to the government’s recent data, nearly 68 per cent of the total Mudra beneficiaries are female, out of which more than 50 per cent belong to SC, ST, or OBC classes. Minorities make up 11 per cent of the sanctioned accounts.

The central focus of the scheme has been to promote self-employment and small business units, particularly in the informal economy. Micro units that have been funded under Mudra loans in the last 10 years have generated employment for nearly 100 million people, out of which a significant number have been women.

The Mudra scheme operates in three loan categories: Shishu (up to Rs 50,000), Kishor (Rs 50,000 to Rs 5 lakh), and Tarun (Rs 5 lakh to Rs 10 lakh). The trend of sanctioned loans has undergone a complete shift over the years. In FY16, the proportion of Kishor loans was only 5.9 per cent of the total disbursal. In FY25, their share increased to 44.7 per cent, indicating a growing requirement for larger credit amounts as companies expanded.

The size of the loan tickets has also increased significantly—Rs 38,000 in FY16 to Rs 72,000 in FY23, and then to Rs 1.02 lakh in FY25. The trend suggests the direction of increasing maturity of businesses seeking to tap formal capital to grow and service working capital requirements.

"Access to appropriate finance has always been a constraint on the growth of micro and small enterprises in India. The new Tarun Plus category provides larger, collateral-free loans to help businesses fund scaling, technology upgrade, and market reach expansion", says Kunal Varma, the founder and CEO of Freo, a digital banking platform.

He also adds, "Additionally, improved loan products will feature under the Credit Guarantee Fund for Micro Units (CGFMU), which will potentially bring additional comfort to lenders and encourage them to lend to worthy enterprises."

For women borrowers, the growth has been more encouraging. The amount of loan disbursed per woman has been 13 per cent compounded annual growth rate (CAGR) and reached Rs 62,679 in FY25. The incremental deposit per woman as a proxy to increased financial activity also grew at 14 per cent CAGR and reached Rs 95,269 in FY25.