I will tell you how Mudra loans are useful to the society. I came across a small time shoe seller. He wanted his IT returns done for the first time in his life. He did this because he wanted a Mudra loan. He has some priority in loan allocation because he belongs to scheduled tribe category.
Then I came across another guy. His story is interesting. He did hotel management from somewhere and never got jobs in his line of training. But he was hired in Nike store and was working long hours for minimal pay. After working for a couple of years, his friends who were into small businesses motivated him to get out of that situation and start small on his own. They showed him references and resources. He came out from working in an established company and started selling 'tempered glass' covers for mobile phones on a road side in Vijayawada. You should appreciate that it is a daring step as well as ego cleansing one. His road side business grew and he set up another stall a little far away and then again another one. He hired two boys to sit in those two new stalls. He buys his glass along with all his partners together in Vijayawada in bulk from an importer in Mumbai. These guys buy the glass for Rs. 10 and fix the glass on customers phones for Rs. 50. on the road side. He makes more than a lakh rupees a month. He told me that though he does not pay any rent, he pays for police protection which he considers as similar to rent. I think such entrepreneurs are the hope for this nation. Those who are nimble footed and are willing to take risks putting aside all ego and comforts.
Mudra loans are targeted at such people. There are bound to be some failures. But, I do not think it is going to consume our banks, the way big industrial loans did. Most Mudra loan holders are uneducated. They are defaulting and this default reflects on their credit history. That will close down their ability to procure loans in future. They will soon realize this and they will start paying on time. Next alternate for them is to go to pawn brokers who charge much more interest. So they will not close down this opportunity window, once, they understand the implications.
Mudra is a well thought out financing outreach by the government. The amount is not really Rs 17K as you mentioned. It works on 3 different slabs and the highest slab can go upto Rs. 10 lakhs.
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