Policy Update
Radhika Gupta
Background
The Indian Government has tried to promote entrepreneurship time and again through initiatives like Startup India, MUDRA Yojana, Atal Innovation Mission, etc. as small businesses not only help create jobs and opportunities for Indians, but also ensure national growth and development as well. However, the benefit of such measures was found to be inequitable, as socially marginalized groups faced major challenges in setting up their own enterprises and obtaining loans for the same.
To address this issue, the Stand-Up India Scheme was launched in April 2016 by the Ministry of Finance, Government of India. This scheme targets women and Scheduled Caste (SC)/ Scheduled Tribes (ST) Entrepreneurs and provides them with capital to start their own businesses in manufacturing, services, the trading sector, and activities allied to agriculture (like fishing), among other such fields.
Under the Stand-Up India program, the required financial assistance is provided by banks in the country, who are instructed to facilitate bank loans between Rs 10 Lakh and Rs 1 Crore to at least one SC or ST borrower and at least one woman per branch. Both public and private sector banks as well as regional rural banks are covered under this.
Functioning
Under this program, a web portal (https://www.standupmitra.in/) was built by the Small Industries Development Bank of India (SIDBI) to link prospective borrowers to banks for loans and provide support to the beneficiaries through connecting them to a vast network of Hand Holding Agencies engaged in training, skill development, mentoring, project report presentation, application filling, utility support services, subsidy schemes, etc.
Composite loans are provided under this scheme, which cover 85% of the project cost, and are inclusive of term loans and working capital. The interest rate on the provided capital is the lowest applicable bank rate for the category under which the loan is taken. A period of seven years is given to the beneficiaries to repay the loan, with up to eighteen months of moratorium period. Security cover is provided to the scheme’s beneficiaries through the Credit Guarantee Fund Scheme for Stand-Up India Loans (CGFSIL).
To qualify as a beneficiary of the scheme, the applicant must have started Greenfield Enterprise (a new business venture), should be either a woman or an individual from the ST/SC category, be at least 18 years of age, and not be in default to any bank or financial institution. In case of a non-individual enterprise, the SC/ST or woman entrepreneur must own at least 51% shares or stake in the enterprise.
Impact
The Stand-Up India Scheme has benefitted 2,75,321 entrepreneurs by sanctioning their loans, according to the latest government records. An amount of ₹62807.46 crore has also been sanctioned for providing the required capital to the beneficiaries.
Also, more than 24,613 handholding agencies have participated in this scheme by providing training and mentoring to the target groups. About 1,48,526 bank branches have been connected by the mission of Stand-Up India, and 79 private money-lenders have also onboarded the program.
According to the official records detailing the financial status of the scheme’s target group (from November 2018 to November 2024), there have been significant changes. These include-:
- The number of SC bank accounts grew from 9,399 to 46,248 with loan amount provided to them rising from ₹1,826.21 Crore to ₹9,747.11 Crore.
- ST accounts also increased from 2,841 to 15,228 with sanctioned loan amounts increasing from ₹574.65 crore to ₹3,244.07 crore.
- Accounts of women entrepreneurs also grew from 55,644 to 1,90,844, with sanctioned loan amounts rising from Rs. 12,452.37 crore to Rs. 43,984.10 crore.
Challenges
Despite the widespread positive impact of the scheme, various challenges have also been reported. According to various news reports, there was a flat growth in loans sanctioned during the financial year 2023-24 under the Stand-Up India program. The official data revealed that only 39,643 loans were sanctioned in FY24 compared to 39,907 loans sanctioned in FY23. This is even after the scheme grew at a 100 percent rate from 19,749 loans sanctioned in FY22.
A drop was also recorded in the number of loans disbursed (the final step of loan payment, where the borrower actually receives the money), as 17,374 loans were disbursed in FY24, down by 12 percent from 19,872 in FY23. Loans disbursed in FY22 under the scheme stood at 12,259. This data can likely be attributed to low awareness about the scheme amongst the target groups, application fatigue due to lengthy procedures or rejections, problems with the reluctance of banks to give credit to first-generation SC/ST or women entrepreneurs lacking collateral or strong credit history, as well as weak follow-up mechanisms and hand-holding post loan sanction.
Another major problem associated with implementation is the difficulty and rigidity of the process required to qualify as a beneficiary under this scheme. Various different documents need to be filled and submitted to the banks for obtaining the capital, making it a time-consuming and difficult process for women or SC/ST entrepreneurs, especially those who are less-educated. Also, informal enterprises and family businesses started or continued by SC/ST or women entrepreneurs, which urgently require capital, are not considered eligible for loans under the Stand-Up India Scheme.
Official government records also show that till date only 4,663 beneficiaries have requested help from the Hand Holding Agencies connected with the scheme. This is a very small number vis-à-vis the total number of beneficiaries and raises questions about the awareness amongst the entrepreneurs about these agencies, as well as their efficiency and easy accessibility.
Way Forward & Suggestion
The Stand-Up India Scheme is a groundbreaking initiative that has helped members from the Scheduled Castes and Scheduled Tribes as well women, to become financially independent by building their own businesses. Through significant achievements in timely loan sanctions and disbursements, it continues to encourage inclusive development. However, better implementation can be ensured by following suggestions like-:
– Spreading awareness about the scheme even in rural and remote areas through community radios, WhatsApp messaging, and collaboration with local influencers can help reach the target groups effectively.
– Simplifying the documentation and application process of the scheme and providing multilingual support across all digital forums, as well as printed forms for entrepreneurs in rural or tribal areas.
– Expand the Greenfield Enterprise category to include informal and family-owned businesses operated by SC/ST or women entrepreneurs.
– Provide banks, especially those in the private sector, with proper incentives to provide loans, as well give them compulsory annual targets to fulfill.
– Spread awareness about the hand-holding agencies and make them more accessible to the disadvantaged groups. NGOs and Self-Help Groups can also be onboarded in the scheme.
– To address the low disbursement rate of loans, ensure better follow-up mechanisms post loan sanctions by banks. Ensuring feedback about the hand-holding process and taking timely action accordingly can help improve the loan-disbursement rate and ensure the entrepreneurs receive timely financial assistance.
About the contributor- Radhika Gupta is a research intern at IMPRI. She is currently pursuing her graduation in journalism and mass communication from Bennett University.
Acknowledgement- The author extends her sincere gratitude to Aasthaba Jadeja and fellow interns, who provided guidance throughout the process.
Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.
