ENTREPRENEURIAL FINANCING THROUGH MUDRA YOJANA: A COMPARATIVE STUDY OF RURAL VS. URBAN BENEFICIARIES

Abstract

MUDRA Yojana Pradhan Mantri (PMMY) is one of the pillars of the Indian financial-inclusion strategy, although there is limited evidence on the difference between the outcomes of the rural and urban entrepreneurs. The research is comparative research using primary data of 600 beneficiaries in Uttar Pradesh, Maharashtra, and Tamil Nadu, with interviews with the borrowers and lending officials. The study evaluates differences in loan access, patterns of utilisation, growth of enterprises and repayment patterns using Tobit, logistic, OLS, as well as propensity-score matching models. The results demonstrate that urban borrowers have better chances to acquire loans with higher values and register a better increase in sales and profits, whereas rural borrowers are segregated in the smaller Shishu loans and are confronted with more obstacles in market accessibility and financial literacy. Rural location has been found to augment the chances of repayment delays in case of education; the health of the loan and financial ability are held constant. Qualitative information substantiates institutional voids, difficulty in documentation, and ecosystem limitations and restrictiveness as primary contributors to such disparities. It is in the contribution to the financial intermediation and the entrepreneurial-ecosystem theory, as it is shown that the local conditions influence the effectiveness of credit. It has been recommended to have more financial literacy programs, post-loan support, and systems that will facilitate the graduation of rural entrepreneurs into higher loan categories.