The micro enterprise sector in India comprises a large number of micro, small and medium units catering to processing, manufacturing, trading, and services sectors. These include fruit and vegetable vendors, small fleet operators, food-service joints, repair and maintenance shops, artisans, etc. The standard banking measures and products have not been effective to meet the financial requirements of this sector since these micro units are predominantly sole proprietorship or own account enterprises, a segment that usually fails to meet the stringent checks of banks for loans.
To help these businesses grow and compete with the bigger players, the Prime Minister of India, Narendra Modi, launched MUDRA on 8th April 2015. MUDRA is an acronym for Micro-Units Development and Refinance Agency, a wholly owned subsidiary of Small Industries Development Bank of India (SIDBI). The parent organisation, i.e. SIDBI, is responsible for developing and refinancing all small and micro-enterprises sector units by helping them with the necessary finance and other related support. The credit products offered by MUDRA, popularly known as Mudra loans, help micro units or small businesses grow their business or manage operational needs through easy finance schemes.