Funding the unfunded

Jammu & Kashmir State is having the biggest economic strength in hugely spread small enterprises.
Funding the unfunded
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Jammu & Kashmir State is having the biggest economic strength in hugely spread small enterprises. The small enterprise sector includes small manufacturing units, service sector units, shopkeepers, fruits / vegetable vendors, food-service units, repair shops, small industries, artisans, food processors, horticulture activities and others, in rural and urban areas.

Instead of having a chain of big companies, the state has almost 5 lakh small enterprises in horticulture, crafts, tourism and other sectors. During the period of two and a half decades of strife in the state, it's this small enterprise sector which has kept the economy floating.

However, there are certain kinds of imbalances in the system which have not allowed this sector to grow the way it should have been. Notably, the people associated with this small enterprise sector are the ones who have survived worst conflict situations; they have survived hartals, bandhs, which means they have a good business model. So what is needed is to scale them up so that this sector expands and generate more employment opportunities. For this it's the technology, marketing and above all availability of hassle free finance which can give boost to this sector.

Availability of timely and appropriate finance to any business is a key to its success. The flow of credit from banks or other financial institutions is not a problem to big businesses. However, financial support from the formal banking system to small borrowers especially persons of small means has always remained a concern.

Financial architecture in India is undergoing tremendous transformation since Narendra Modi-led government took reins of power at the centre. The transformation process set in motion with the launch of Prime Minister's Jan Dhan Yojana (PMJDY) a year back followed by social security schemes in the shape of insurance policies has been tailored to reach to the unreached through formal financial sector.

The latest in the series is MUDRA (Micro Units Development & Refinance Agency) Yojana currently being propagated across the country. The scheme is aimed to explore the potential of huge untapped economy scattered in the small enterprise sector through formal means of finance from banks and other financial institutions.

The loans under the scheme range from Rs.50,000 to Rs. 10 lakhs, that too, without any collateral security and at lower rate of interest pegged around 12 per cent or so.

The scheme is aimed at 'funding the unfunded sections of the society' and at least 2 crore people would be targeted this financial year to be given Rs 1,22,000 crore loan under the scheme. Remarkably, the scheme envisages sixty per cent of loans to be given under 'Shishu' (loans up to Rs.50,000) category . It's worth mentioning that loans above Rs50,000 to Rs 5 lakhs would be given under 'Kishor' and loans above Rs 5 lakhs and up to Rs. 10 lakhs would be given under 'Tarun'. The names have been given to the category of finance 'to signify the stage of growth / development and funding needs of the beneficiary small entrepreneur and also provide a reference point for the next phase of graduation / growth to look forward to'.

Notably, already Rs 24,000 crore of loans have been disbursed to 3.7 million small entrepreneurs this year under the scheme.

Now the success of the scheme in J&K depends on two things. One, extensive awareness among the people about the exact meaning of the scheme, that it's a loan scheme with no subsidy component and is repayable like any other loan scheme. It must be made clear during awareness campaigns that the entrepreneur has to submit a detailed project of his activity to the nearest bank for sanction of the loan. Two, after making the people aware that the loans under MUDRA are not any kind of tips from the government but simply a source of making them economically self-sufficient, the banks have to bank upon the confidence-lending mantra where they have to grant the loans without asking for collateral securities.

So, a positive mindset of the bankers at the counter towards MUDRA can help to realize the dream of converting our 5 lakh small entrepreneurs into an army of millions of small entrepreneurs. This would definitely translate into creating huge employment avenues for the unemployed and overall economic growth of the state. Precisely, an organised financial support to these small entrepreneurs who are considered as the biggest cogs in the wheels of business will help the economy grow.

(The views are of the author & not the institution he works for)

Greater Kashmir