10 Years of Mudra Yojana: Credit Growth, Inclusion Wins & What’s Next for India’s Small Businesses

Introduction: 10 Years of Funding the Unfunded

Launched in 2015, the Pradhan Mantri Mudra Yojana (PMMY) aimed to bridge a critical gap in India’s financial system—credit access for micro and small businesses. Its mission was simple yet bold: “Fund the Unfunded.”

Ten years later, the scale of the scheme is massive. Over 52 crore loans have been sanctioned, with cumulative disbursements exceeding ₹32.6 lakh crore. These numbers suggest success—but numbers alone don’t tell the full story.

So, what is the real Mudra Yojana impact on small businesses?

Has it led to sustained entrepreneurship? Are borrowers expanding businesses or merely recycling credit? And what does this mean for banks, NBFCs, and investors betting on India’s grassroots growth?

This article dives deep into the decade-long journey of Mudra, examining credit flows, regional reach, repayment stress, and the road ahead. More importantly, we’ll look at where the next phase of opportunity lies—not just for entrepreneurs, but for those investing in India’s MSME ecosystem.

Credit Surge: A Decade of Disbursals

In terms of raw credit delivery, the Mudra Yojana impact on small businesses is hard to ignore. What started as an ambitious financial inclusion program has grown into one of the largest micro-credit schemes globally.

From just ₹1.3 lakh crore in FY16, annual disbursals have surged to ₹5.3 lakh crore in FY24—a fourfold jump in less than a decade. Even during the COVID-19 disruption in FY21, disbursements remained strong at ₹3.1 lakh crore, underscoring the scheme’s resilience.

The momentum hasn’t slowed. In FY24 alone, banks and NBFCs sanctioned over 6.6 crore loans, reflecting continued demand from micro-entrepreneurs, street vendors, and first-time borrowers across rural and semi-urban India.

This steady rise in credit volumes suggests that the program has successfully plugged a major financing gap at the base of India’s economy. For many entrepreneurs, Mudra has served as their first-ever formal loan, helping them avoid high-cost informal lending sources.

However, scale is just one part of the story. The key question now is: how is this credit being distributed—and who is truly benefiting?

That’s where we turn next.

Who Got the Loans: State & Social Distribution

The Mudra Yojana impact on small businesses is not evenly spread across India. While the scheme boasts massive national reach, the credit distribution shows stark regional and social contrasts.

Top States by Disbursement

States like Tamil Nadu, Uttar Pradesh, Karnataka, Bihar, West Bengal, and Maharashtra dominate the charts. Tamil Nadu alone received over ₹3.2 lakh crore in sanctioned loans, making it the top Mudra beneficiary.

However, several Northeastern states and Union Territories received disbursements amounting to just a few hundred crores over ten years. This imbalance reveals gaps in outreach and last-mile delivery—issues that still limit the scheme’s full potential.

Who Benefited: A Social Snapshot

One of Mudra’s standout achievements lies in social inclusion.

• Women account for 68% of all Mudra accounts—translating to more than 35 crore loans.
• Borrowers from Scheduled Castes (SCs), Scheduled Tribes (STs), and Other Backward Classes (OBCs) make up around 50% of beneficiaries.
• Minority communities account for an additional 11%.

This data signals that the scheme is reaching historically underserved groups—particularly women and marginalized communities—and helping them launch or scale micro-enterprises.

Still, the regional skews and limited uptake in remote areas show there’s room for improvement. While credit has reached crores, it hasn’t reached everyone equally.

As we move forward, let’s examine how loan sizes have evolved—and what that says about business maturity and borrower behavior.

Evolving Loan Mix: From Shishu to Kishor

One of the most telling signs of the Mudra Yojana impact on small businesses is how the loan mix has changed over time.

From Ultra-Micro to Growth-Oriented Lending

In the initial years, nearly 90% of all Mudra loans fell under the ‘Shishu’ category—amounts below ₹50,000. These were primarily used by ultra-small businesses: vegetable vendors, tailors, and other self-employed workers.

Fast forward to FY25, and the picture has shifted.

• The share of Shishu loans has dropped to 52%
• ‘Kishor’ loans (₹50,000 to ₹5 lakh) now account for 45% of all disbursals
• The average loan size has grown from ₹38,000 in 2016 to ₹1.02 lakh today

This upward shift suggests that many borrowers are moving beyond survival-stage businesses. They’re reinvesting, expanding operations, and taking on higher-value activities—signs of maturing entrepreneurship.

Is Credit Growth Equal to Business Growth?

The rising ticket sizes are encouraging. However, some experts caution that this trend may also indicate borrower dependence on recurring loans, rather than genuine business expansion. There’s concern that a segment of users may be cycling credit—taking new loans to repay old ones.

This distinction matters. For the scheme to succeed in the long run, it must promote real enterprise development, not just repeat borrowing.

The NPA Question: How Sustainable Is the Growth?

While the credit boom under PMMY looks impressive on paper, the Mudra Yojana impact on small businesses isn’t just about access—it’s about sustainability.

Rising NPAs: An Early Red Flag

By 2019, the Reserve Bank of India flagged that nearly ₹17,000 crore worth of Mudra loans had turned into non-performing assets (NPAs). While the overall NPA rate under Mudra is just 2.2%, far below the 8% average for public sector banks, experts remain cautious.

Many borrowers in this segment lack formal business records, credit history, or collateral. While this makes PMMY inclusive, it also means lenders carry higher risk—especially in the absence of monitoring and support.

Are Borrowers Growing, or Just Rolling Over Debt?

A key concern is loan cycling. Some borrowers may be taking fresh Mudra loans simply to repay previous ones, rather than to fuel new business growth. This pattern can create a debt trap and artificially inflate the scheme’s success.

Also, banks operating in high-NPA geographies are reportedly tightening credit filters, making it harder for even genuine micro-entrepreneurs to access future loans.

Support Beyond Credit is Missing

One major limitation of the scheme so far? A lack of post-loan support. Many first-time entrepreneurs need business training, digital literacy, and market linkages—but the Mudra framework currently offers little beyond financing.

Without these elements, credit alone may not lead to viable enterprises. In fact, it may increase risk.

So, while the Mudra Yojana has opened credit lines, the real test lies in strengthening the ecosystem around borrowers.

Let’s look ahead to what that evolution could look like.

From Credit Scheme to Business Ecosystem: What’s Next

As the Mudra Yojana enters its second decade, its impact on small businesses has been clear—millions have gained access to formal credit. But if Mudra is to unlock its full potential, it must now evolve from a lending programme into a complete entrepreneurial support ecosystem.

Credit Alone Is Not Enough

Loans are a starting point—but many micro-entrepreneurs also need:

• Business skills training
• Digital onboarding tools
• Marketing support
• Mentorship and compliance help

Without this infrastructure, many first-time borrowers risk stagnation or failure, despite access to capital.

What the Next Phase of Mudra Could Look Like

1. Integration with Skill India & Digital India
   Providing digital literacy, UPI training, GST registration help, and bookkeeping apps through partnered institutions.
2. On-ground Support via Banking Correspondents & NGOs
   A stronger network of agents who can guide borrowers after loan disbursement—especially in under-penetrated regions.
3. Market Access for Micro-entrepreneurs
   Link Mudra beneficiaries with e-commerce platforms, government procurement portals (GeM), and B2B buyers.
4. Performance-based Top-Up Loans
   Create incentives for well-performing borrowers to move up the credit ladder with better terms and larger working capital.

A More Sustainable Future

The Mudra Yojana impact on small businesses has laid the groundwork for financial inclusion. Now, the mission must shift toward capacity building. If done right, Mudra can serve not just as a financial product—but as the engine of India’s next generation of entrepreneurs.

Stock: Who Stands to Gain?

The Mudra Yojana impact on small businesses doesn’t just shape rural livelihoods—it also opens up key investment opportunities across banking, fintech, and MSME enablement.

Let’s look at sectors and stocks likely to benefit from this evolving ecosystem.

1. PSU Banks & Lending-Focused NBFCs

Public sector banks are the backbone of Mudra loan disbursal. As demand grows, they gain on loan book expansion and inclusion targets.

Stocks to watch:

• State Bank of India (SBI) – India’s largest lender, deep rural reach
• Bank of Baroda – Aggressive in MSME and digital onboarding
• Canara Bank – Strong exposure to PMMY and priority sector lending

Among NBFCs and small finance banks, focused exposure to first-time borrowers is key.

Top picks:

• Ujjivan Small Finance Bank
• AU Small Finance Bank
• Spandana Sphoorty
• CreditAccess Grameen
• Muthoot Microfin

These players specialize in unsecured microloans and cater to self-employed segments.

2. MSME Enablers & Rural Fintech

With credit penetration rising, businesses that enable small enterprises also benefit.

Watch these stocks:

• Vakrangee Ltd – Rural banking kiosks, last-mile financial services
• Fino Payments Bank – Microbanking + digital outreach in underserved areas
• PayNearby (if listed in future) – Major BC network for rural onboarding

Additionally, companies supporting MSME commerce like:

• IndiaMart – B2B marketplace for small manufacturers and suppliers
• EaseMyDeal – Serving small travel agents and retail customers

3. Rural Demand Plays

Credit access fuels spending. So consumer-facing companies in FMCG, two-wheelers, and entry-level electronics also benefit.

Examples:

• Hero MotoCorp
• Dabur, Emami, Godrej Consumer

These companies already have a rural footprint and can see incremental volume growth from newly financed micro-entrepreneurs.

Conclusion: Credit Isn’t Enough, Time to Build Foundations

Ten years in, the Mudra Yojana impact on small businesses is undeniable. It has brought credit to the doorstep of millions who were long excluded from the formal financial system—especially women, first-time entrepreneurs, and marginalized communities.

But credit, while critical, is only part of the equation.

The scheme has unlocked access, but long-term success now depends on building support systems around that access—training, digital tools, mentorship, and markets. Without these, the risks of over-lending, loan cycling, and missed potential remain real.

For policymakers, the next phase must be about deepening the ecosystem. For investors, the opportunity lies in the enablers—banks, NBFCs, fintech firms, and rural commerce platforms that ride this wave of entrepreneurial energy.

The road ahead isn’t just about funding the unfunded—it’s about nurturing the funded into sustainable, thriving enterprises.

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FAQs: Mudra Yojana Impact on Small Businesses

Q1. What is the Mudra Yojana scheme?
The Pradhan Mantri Mudra Yojana (PMMY) is a government initiative launched in 2015 to provide collateral-free loans to micro and small businesses across India.

Q2. How many loans have been given under Mudra?
As of 2025, over 52 crore loans worth ₹32.6 lakh crore have been sanctioned under the scheme.

Q3. Who benefits most from Mudra loans?
Primarily women entrepreneurs, SC/ST/OBCs, and rural micro-businesses such as street vendors, small traders, and artisans.

Q4. What are the different categories of Mudra loans?
There are three:

• Shishu (up to ₹50,000)
• Kishor (₹50,000 to ₹5 lakh)
• Tarun (₹5 lakh to ₹10 lakh)

Q5. Are Mudra loans sustainable in the long run?
While NPA levels are low (around 2.2%), concerns remain about loan recycling and lack of post-credit support. Future success depends on building a stronger support ecosystem.

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