Women-led MSMEs in India: Issues and Opportunities

What is the Credit Gap?

1. The credit gap means the difference between the amount of money a person needs (or applies for as a loan) and the amount they actually receive from banks or financial institutions.

What does a 35% credit gap mean for women?

1. If a woman entrepreneur applies for a loan of ₹1,00,000, she receives only about ₹65,000.
2. This means she does not get 35% of the loan amount she needs.
3. So, her credit gap is 35%.

For men, a 20% credit gap means:

1. If a male entrepreneur applies for ₹1,00,000, he receives about ₹80,000.
2. He misses 20% of the loan amount, so the credit gap is 20%.

Pradhan Mantri MUDRA Yojana (PMMY)

Particulars

Details

Launched By

Ministry of Finance

Launch Year

2015

Purpose

To provide collateral-free loans to small and micro-enterprises

Target Group

Small business owners, non-farm workers, women entrepreneurs, artisans

Loan Type

Term loans, working capital loans, overdraft facilities

Loan Amount Range

Up to ₹10 lakh

Loan Categories

Shishu (up to ₹50,000) - Kishore (₹50,001 to ₹5 lakh) - Tarun (₹5,00,001 to ₹10 lakh)

Collateral Required

No collateral required

Interest Rate

Depends on the bank and applicant profile (generally 8%–12%)

Repayment Period

Flexible, as decided by banks (usually 3–5 years)

Implementing Agencies

Public sector banks, private banks, cooperative banks, MFIs, NBFCs

Key Benefits

Easy access to credit - Encourages self-employment - Boosts small businesses

Special Focus

Women, SC/STs, and people from backward areas

As of 2024 (Key Stats)

64% of PMMY accounts held by women - Women received only 41% of total loan amount

Challenges

Way Forward

1. Many women cannot get the full amount of loan they need.

Create special credit schemes for women with low or no collateral.

2. Women receive less funding even if they have more loan accounts.

Ensure fair distribution of loan amounts based on the number of accounts.

3. Poor awareness of government schemes among women in rural areas.

Start financial education programs and local help centers for women.

4. Banks do not support or guide women properly.

Train bank staff to support and assist women entrepreneurs.

5. Women are seen as risky borrowers due to lack of property.

Accept group guarantees or alternate forms of security for women.

6. Women take longer and more visits to get loans than men.

Set up women-only help desks in banks to reduce bias and speed up processes.

7. Most women work in the informal sector and avoid banks.

Use platforms like Udyam Assist Portal to bring informal businesses into formal setup.

Ensure IAS Mains Question:

Q. Despite a large number of loan accounts under the Pradhan Mantri MUDRA Yojana (PMMY) being held by women, there remains a significant gap in the credit amount disbursed to them. Critically examine the reasons for this disparity. Suggest measures to ensure equitable financial access for women-led MSMEs. (250 words)

Ensure IAS Prelim MCQ:

Q. Consider the following statements about Pradhan Mantri MUDRA Yojana PMMY:

1. Loans under PMMY require collateral security.
    
2. The scheme is implemented through public and private sector banks only.
    
3. PMMY aims to promote self-employment among small entrepreneurs.
    

Which of the statements given above is/are correct?

A) 1 and 2 only
 B) 3 only
 C) 2 and 3 only
 D) 1, 2 and 3

Answer: B) 3 only
 Explanation:

Statement 1 is incorrect:  PMMY provides loans without collateral.

Statement 2 is incorrect:  NBFCs, MFIs, and cooperative banks also implement it.

Statement 3 is correct: PMMY aims to promote self-employment among small entrepreneurs.