Sustaining Micro Enterprises through Microfinance

The Micro Enterprises (ME) sector employ approximately 10.76 crore (97%) of the 11.10 crore people engaged in the Micro, Small and Medium Enterprises sector. Given its potential for employment generation and providing livelihood to millions of artisans service providers and small traders, there has been a slew of policy initiatives and enabling provisions by the Government and financial institutions to foster their growth which include setting up specialised institutions like Micro Units Development and Refinance Agency (MUDRA) Bank and credit guarantee funds. It led to spurt in financing them through Pradhan Mantri MUDRA Yojana and Stand-up India. However, the sector faces challenges on many counts including access to information, markets, technology and credit from formal sources. It has specific life cycle needs and characteristics which call for niche products and services. This article examines the enabling environment, state of the sector, the assessed credit gap, life cycle needs of the MEs, factors impeding growth, causes of non-performing assets and suggest measures to overcome them.