From job seekers to job creators: Mudra Yojana triggers mass entrepreneurship in India

Launched in 2015 to democratise access to finance, the Pradhan Mantri Mudra Yojana (PMMY) has emerged as a cornerstone of India’s entrepreneurial transformation, disbursing over ₹32.61 lakh crore in loans to more than 52 crore beneficiaries. The scheme has redefined the country’s credit space by shifting the focus from politically influenced corporate lending to empowering grassroots entrepreneurs.

Before PMMY, India’s financial system was riddled with "phone banking", where loans were reportedly handed out to big businesses based on political connections. Ordinary citizens, small business owners, and micro-entrepreneurs—particularly from minority communities—were sidelined by bureaucratic hurdles and lack of support. Meanwhile, public sector banks piled up non-performing assets (NPAs) from reckless corporate lending, leaving small players dependent on informal lenders.

Mudra disrupted this pattern. Designed to offer collateral-free credit to small and micro businesses, it provides loans across four categories—Shishu (up to ₹50,000), Kishor (₹50,000 to ₹5 lakh), Tarun (₹5 lakh to ₹10 lakh), and Tarun Plus (₹10 lakh to ₹20 lakh). The scheme has reached deep into semi-urban and rural areas, creating a new generation of job creators instead of job seekers.

According to the 2024 SKOCH report “Outcomes of ModiNomics 2014-24,” Mudra alone has contributed 2.52 crore steady and sustainable jobs annually since 2014. In J&K, 20,72,922 loans have been sanctioned, marking a visible shift toward self-reliance in the region. The ripple effects are far-reaching—from expanding India’s tax base and promoting formalization to igniting the fintech revolution through UPI and Direct Benefit Transfers.

The scheme’s impact is especially visible in job creation, financial inclusion, women empowerment, and creditworthiness building:

Job Creation: Over 1 crore jobs were generated between 2015–18 alone through Mudra-supported businesses.

Women Empowerment: Nearly 70% of all Mudra loans have gone to women entrepreneurs. Per woman PMMY disbursement rose by a CAGR of 13% (to ₹62,679), while per woman incremental deposits rose by 14% (to ₹95,269) from FY16 to FY25.

Marginalized Communities: Over 50% of all loans were availed by SC, ST, and OBC entrepreneurs.

Skill Development & Social Empowerment: Beneficiaries have upgraded skills, expanded operations, and improved their social standing.

Poverty Reduction: Loans have helped individuals launch income-generating activities, reducing dependence on exploitative sources.

Creditworthiness: PMMY helps build credit history, opening future access to formal credit.

International bodies have repeatedly acknowledged the program’s success. In 2017, the IMF noted that PMMY has enabled women-led businesses to access finance. In 2019 and 2023, it again recognized the scheme for boosting micro-enterprise development and increasing the number of women-owned MSMEs. Its 2024 statement emphasized how PMMY supports formalization and self-employment in India.

The State Bank of India (SBI), in its latest report “A Decade of Audacious Dreams,” praised Mudra’s role in expanding MSME credit, which rose from ₹8.51 lakh crore in FY14 to ₹27.25 lakh crore in FY24, projected to surpass ₹30 lakh crore in FY25. MSME credit now accounts for nearly 20% of total bank credit, up from 15.8% a decade ago.

The evolution of loan distribution also reflects deepening financial confidence. Kishor loans (₹50,000–₹5 lakh) rose from 5.9% in FY16 to 44.7% in FY25, showing a progression from micro to small enterprises. The average loan size jumped from ₹38,000 in FY16 to ₹1.02 lakh in FY25. Loan disbursals grew by 36% in FY23, indicating revival in entrepreneurial confidence.

SBI also spotlighted the Budget 2025 announcement of expanding MUDRA loans for homestays—creating a ₹1,500 crore opportunity under the Shishu category for the tourism sector. This reflects a strategic push to support local economies and rural tourism entrepreneurship.