New Delhi: As the Pradhan Mantri MUDRA Yojana (PMMY) completes ten years since its launch on April 8, 2015, the scale and scope of the microfinance initiative stand as a defining feature of India’s economic evolution over the past decade. What began as a financial inclusion effort under Prime Minister Narendra Modi’s administration has transformed into one of the most ambitious credit outreach programs aimed at empowering micro and small-scale entrepreneurs across the country.
Over the years, PMMY has facilitated 52.07 crore loans, with Rs. 33.19 lakh crore sanctioned and Rs. 32.40 lakh crore disbursed as of February 2025. The sheer volume of disbursement signals more than just numbers; it reflects a shift in how the Indian economy supports its most grassroots-level contributors—those who previously existed outside the scope of formal banking.
From Exclusion to Empowerment: A Changed Credit Culture
Prior to PMMY’s launch, access to institutional credit was predominantly reserved for large corporations and well-connected entities. Micro businesses, street vendors, artisans, and first-time entrepreneurs were routinely denied credit due to lack of collateral, minimal documentation, or absence of credit history. Financial institutions remained inaccessible to millions, particularly in rural and semi-urban regions.
PMMY broke that barrier by offering collateral-free loans under three key categories: Shishu (up to Rs. 50,000), Kishor (Rs. 50,000 to Rs. 5 lakh), and Tarun (Rs. 5 lakh to Rs. 10 lakh). In a significant step forward, the government later introduced Tarun Plus, extending the upper limit to Rs. 20 lakh for entrepreneurs who had successfully repaid earlier loans under the Tarun category. This upward mobility within the scheme’s structure reflects growing confidence in small entrepreneurs and their ability to scale.
Addressing Historical Inequities in Lending
During the pre-2014 era, India’s financial system saw widespread irregularities under the United Progressive Alliance (UPA) government. Credit was often directed toward a few corporate houses through what came to be known as “phone banking”—politically influenced lending decisions that led to a sharp spike in corporate debt and rising non-performing assets (NPAs).
Between FY07 and FY12, while overall bank loans grew at 20% CAGR, lending to the top ten corporations surged at 40% CAGR. One of the most prominent conglomerates saw its borrowing grow at 74% CAGR, raising questions about credit concentration and poor risk assessment. As NPAs ballooned, small borrowers faced more restrictions, while banks turned increasingly risk-averse in lending to informal sectors.
MUDRA changed that by democratizing credit, decentralizing access, and shifting focus to small-scale job creators rather than job seekers.
Empowering the Unbanked: A Boost for First-Time Borrowers
The defining strength of PMMY lies in its ability to onboard first-time borrowers into the formal financial ecosystem. Nearly 20 percent of all loans issued under the scheme have gone to individuals who had never accessed institutional finance before. Many of them were from underserved communities, rural areas, or belonged to marginalized groups who lacked traditional banking relationships.
This credit formalization has not only created avenues for income generation but also broadened the national tax base, strengthened financial accountability, and fostered inclusive entrepreneurship.
The average loan size under PMMY has shown steady growth—from Rs. 38,000 in FY16 to Rs. 1.02 lakh in FY25, indicating improved borrower capacity and rising demand for larger working capital needs. Within specific categories, Shishu loan averages rose from Rs. 19,411 to Rs. 37,400, while Tarun loans increased from Rs. 7.67 lakh to Rs. 8.32 lakh in the same period.
Women at the Forefront of the Credit Revolution
One of the most transformative impacts of PMMY has been in empowering women entrepreneurs. Nearly 68 percent of loans disbursed under the scheme have gone to women, enabling them to start and expand businesses in sectors like tailoring, beauty services, food processing, handicrafts, and small-scale trading.
From Rs. 24,746 in FY16, the average ticket size for women borrowers has risen to Rs. 64,537 in FY25. Over nine years, per-woman loan disbursements have grown at a CAGR of 13%, while incremental deposits by women under the scheme saw a 14% CAGR, suggesting greater income, reinvestment, and financial literacy among women-led enterprises.
Recognized Globally for Inclusive Growth
The International Monetary Fund (IMF) has consistently lauded the MUDRA scheme. In 2017, it acknowledged PMMY’s contribution in enabling women entrepreneurs to access finance. By 2019, the IMF credited the scheme with fostering the development of micro-enterprises and by 2023, highlighted its impact on over 2.8 million women-owned MSMEs.
In 2024, the IMF noted that PMMY played a significant role in formalizing employment, expanding self-reliance, and creating structured micro-business ecosystems, particularly in rural economies.
Adapting to a Digital Future
MUDRA has not remained static. With the account aggregator framework now in place, borrowers can obtain paperless loans by authorizing access to their financial data, thereby reducing the paperwork and processing delays often associated with small-ticket lending.
As the Open Network for Digital Commerce (ONDC) gains traction, micro-entrepreneurs across India—especially in tier 2 and tier 3 cities—are expected to benefit from digital credit enablement, opening up new lines of trade, supply chain financing, and e-commerce participation.
Budget 2025 also expanded the MUDRA scheme into non-traditional sectors. A new provision allows homestay operators in the tourism industry to access Rs. 1,500 crore under the Shishu category, recognizing evolving market demands and shifting employment trends.
Looking Ahead: What’s Next for MUDRA?
Policy experts have suggested that the next stage of evolution for MUDRA could include education-linked loans or skilling and vocational training finance, where individuals could borrow for learning and repay after completing training. This could potentially bridge gaps in both education and entrepreneurship, enhancing employability while retaining the scheme’s core principle of inclusive credit.
Another area of potential is the integration of real-time analytics, allowing lenders to tailor loan offerings based on digital cash flows, thereby making lending smarter, faster, and safer.
Despite the massive loan disbursement, NPA levels under MUDRA remain low, defying concerns about unsecured lending. This is largely attributed to the strong repayment culture among micro-entrepreneurs and the program’s built-in mechanisms for monitoring and accountability.
The ten-year journey of the Pradhan Mantri MUDRA Yojana stands as a rare example of policy-driven economic transformation that delivered results at scale. It took credit access out of boardrooms and brought it to kirana stores, tailoring units, food carts, and village workshops. It enabled millions to become first-time borrowers, business owners, and job creators, bridging the formal-informal divide in India’s financial system.
As the country moves toward a digitally enabled, entrepreneur-friendly economy, MUDRA will continue to play a critical role in shaping aspiration-led growth—not just as a credit scheme, but as a platform of opportunity, dignity, and economic empowerment.
