Higher loan limits to enterprises addressing 'Missing Middle problem': SBI

Increase in Mudra disbursement leads to decline in states' subsidies allocation

With the average ticket size of loans doubling to Rs 72,000 in FY23 from Rs 38,000 in FY16 along with encouraging trends being seen in the disbursal of the 'Tarun' and 'Kishore' variant with higher loan limits under the Pradhan Mantri Mudra Yojana (PMMY) is addressing the ‘Missing Middle Problem’ in enterprises growth, said a report released by SBI research team on Thursday. 

The loans under PMMY have been divided into three categories based on the need for finance and the stage in the maturity of the business. These are Shishu (loans up to Rs 50,000), Kishore (loans above Rs 50,000 and up to Rs 5 lakh), and Tarun (loans above Rs 5 lakh and up to Rs 10 lakh). 

The manufacturing sector in India has been characterised by the missing middle in which there is the concentration of small and micro firms at one end of the spectrum, and some large firms at the other.        

PMMY loans are becoming bigger indicating economies of scale as Shishu share declines and Kishore increases,” it added.  

The disbursals under the scheme have grown by 36 per cent in FY23 to Rs 4.5 trillion.

The report highlighted a jump in Mudra Empowerment Multiplier (MEM) reflecting the substantiative impact on state subsidy allocation evident through higher MUDRA disbursement.

The data analysis of 30 states for the time period of FY19-FY22 reveal that an increase of Rs 1 crore in mudra disbursement has led to the decline of Rs 1.67 crore in States’ subsidies allocation,” it added. 

Shishu and Tarun products of Mudra yojana have a more meaningful impact in decreasing states' subsidies as Rs 1 crore disbursement under each product results in Rs 3.54 crore and Rs 6.67 crore respective fall in states’ subsidy allocation.    

SBI said that increasing women participation in PMMY leads to a better financial situation of women borrowers. “Increasing share of Kishore in both the number of accounts and specifically in disbursements under women entrepreneurs accounts signify the progression of women entrepreneurs in their businesses,” it added. 

The disbursements to minorities are higher in Kishore products than Tarun products and new entrepreneurs have availed most disbursement under Tarun products and least under shishu products, the report said.