What are the Government Schemes Related to Microfinance?

Introduction to Government Microfinance Schemes

The Indian government has launched various initiatives to promote microfinance, recognizing its critical role in financial inclusion and poverty alleviation. These schemes aim to provide accessible credit to the unbanked and underserved populations, particularly in rural and semi-urban areas.

Microfinance facilitates small loans and other financial services to individuals or groups who typically lack access to conventional banking services. It empowers beneficiaries, often women, to start or expand small businesses and improve their livelihoods.

Pradhan Mantri Mudra Yojana (PMMY)

Launched in 2015, the Pradhan Mantri Mudra Yojana (PMMY) provides loans up to ₹10 lakh to non-corporate, non-farm small/micro enterprises. These loans are extended by commercial banks, RRBs, Small Finance Banks, MFIs, and NBFCs.

The scheme focuses on funding the 'unfunded' and encourages entrepreneurship among the disadvantaged sections of society, including women and Scheduled Castes/Tribes.

Self-Help Group (SHG) - Bank Linkage Program (SBLP)

The SHG-Bank Linkage Program (SBLP), initiated by NABARD in 1992, is one of the largest microfinance programs globally. It aims to link Self-Help Groups (SHGs) with formal financial institutions.

SHGs are small, informal groups, predominantly of women, who pool their savings and lend to each other. Once mature, these groups become eligible for credit from banks, leveraging their collective guarantee for loans.

National Rural Livelihoods Mission (NRLM) / Aajeevika

The National Rural Livelihoods Mission (NRLM), now known as Aajeevika - Deendayal Antyodaya Yojana-NRLM (DAY-NRLM), was launched in 2011. It aims to reduce poverty by enabling poor households to access gainful self-employment and skilled wage employment opportunities.

NRLM promotes institution building of the poor, primarily through SHGs, and provides financial support, capacity building, and access to credit and markets. It works towards universal financial inclusion for rural poor households.

Deen Dayal Upadhyaya Antyodaya Yojana (DAY-NULM)

The Deen Dayal Upadhyaya Antyodaya Yojana (DAY-NULM) focuses on alleviating urban poverty. Launched in 2013, it aims to uplift the urban poor by enhancing their livelihood opportunities through skill development and self-employment.

DAY-NULM supports the formation of Self-Help Groups (SHGs) among the urban poor and provides them with financial assistance for setting up micro-enterprises. It also includes components for shelter for the urban homeless and vendor support.

Credit Guarantee Fund for Micro and Small Enterprises (CGTMSE)

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) was jointly set up by the Ministry of MSME and SIDBI in 2000. Its primary objective is to make collateral-free credit available to the Micro and Small Enterprise (MSE) sector.

This scheme provides a guarantee cover to banks and financial institutions for collateral-free loans extended to eligible MSEs. It mitigates the risk for lenders, thereby encouraging them to lend more to this crucial sector.