Your guide to microfinance and small business programs in India
Introduction
Getting access to money is really important if you want to start a business in India. Over the last twenty years, the Indian government, non-profit groups, and community programs have created lots of ways to help small businesses get started. These programs give you microfinance, education, and expert advice, especially if you come from an underprivileged background.
This guide will walk you through the main types of microfinance and small business startup programs you can find in India. I’ll give you the knowledge you need to use these resources and unlock your entrepreneurial potential.
Government-backed schemes
The Indian government has set up several major programs to help you get financing and support for micro, small, and medium enterprises (MSMEs). These government-backed programs offer different types of loans, training, and advisory services.
Pradhan Mantri MUDRA Yojana (PMMY)
PMMY is the most famous government program. It offers credit up to ₹10 lakhs (US$12,500) to non-corporate, non-farm, small and micro businesses. As of March 2022, PMMY has given out over ₹20 trillion (US$250 billion) in loans. This has helped more than 300 million entrepreneurs.
PMMY offers three categories of loans:
- Shishu: Below ₹50,000 for affordable sectors
- Kishore: ₹50,001 to ₹5 lakhs for the middle-class segment
- Tarun: ₹5 lakhs to ₹10 lakhs for the upper middle-class segment
Stand-Up India scheme
The government launched the Stand-Up India scheme in 2016. It helps promote entrepreneurship among Scheduled Castes, Scheduled Tribes, and women entrepreneurs. As of March 2022, the scheme has helped with over 1.33 million loans. That’s more than ₹33,000 crore (US$4.1 billion).[2]
The scheme gives you loans between ₹10 lakhs to ₹1 crore (US$12,500 to US$125,000). You also get mentorship, financial literacy training, and capital subsidy support.
Non-profit microfinance providers
India has a strong network of non-profit microfinance providers. These organizations offer small loans and business development services to entrepreneurs and communities that don’t have many options.
Bandhan Bank
Bandhan Bank is the largest microfinance bank in India. It serves the needs of more than 23 million customers. As of March 2022, Bandhan Bank had a loan portfolio of over ₹93,000 crore (US$11.6 billion).
The bank gives you collateral-free loans ranging from ₹10,000 to ₹2 lakhs (US$125 to US$2,500). They also offer business training, financial literacy programs, and help you connect with government schemes.
SEWA Bank
SEWA Bank is a cooperative bank that was founded and is managed by self-employed women in India. As of March 2022, the bank had over 0.5 million members and a loan portfolio of ₹1,800 crore (US$225 million).
SEWA Bank offers individual loans, group loans, and emergency loans. These typically range from ₹10,000 to ₹1 lakh (US$125 to US$1,250). You also get business support services along with your loan.
Community development initiatives
India’s entrepreneurial ecosystem also includes lots of community-driven programs that support small businesses and startups.
Entrepreneurship Development Institutes (EDIs)
EDIs are specialized schools that promote entrepreneurship. They give you training, mentorship, and financing support. As of 2021, there were over 100 EDIs across India. The National Institute for Entrepreneurship and Small Business Development (NIESBUD) is the main organization.
These institutes have trained over 9 million aspiring entrepreneurs since they started.
Rural Self-Employment Training Institutes (RSETIs)
RSETIs are government-sponsored institutes that focus on promoting rural entrepreneurship and ways to make a living. As of March 2022, 586 RSETIs are operating across India. They’ve trained over 56 million people and helped establish more than 32 million micro-enterprises.
Key things you should think about as a borrower
When you’re exploring microfinance and small business support programs, you should think about things like eligibility criteria, loan amounts, and repayment terms, and whether you’ll get extra business development services.
How to navigate the ecosystem
To really make the most of these resources, you can use online directories, talk with support institutions, and compare what different programs offer. Success stories, like Reshma’s tailoring business and Manish’s eco-friendly handicraft startup, show you the amazing impact these programs can have.
My final thoughts
India’s diverse microfinance and small business support ecosystem gives you tons of opportunities if you’re an aspiring entrepreneur or small business owner. When you navigate this landscape and find the right programs, you can unlock your entrepreneurial potential. You’ll also contribute to the country’s economic growth and development.