When the COVID-19 pandemic struck six years ago, there was no short of confusion and economic freeze in India, and the street vendors were in crisis. The stalls that sold vegetables, snacks and more were closed, and millions of people lost the daily income from their work. Introduce the scheme of PM Street Vendor’s AtmaNirbhar Nidhi which was launched on 1st June 2020.
PM SVANidhi was designed as a life support initiative for socio-economic support during the crisis but has gradually become one of India’s most successful micro-credit programmes. The count of people and the scale of economic change at grassroot level is huge as the scheme celebrates its sixth birthday this week. The truth is, though, that in addition to billions of dollars in disbursed loans, millions of informal workers were able to finally break free of the grips of the local moneylender to move into the formal banking system.
This is an astonishing level of empowerment. This is a tremendous degree of empowerment.
To comprehend the effects of PM SVANidhi, one need only consider the flow of credit towards the informal economy. According to the Ministry of Housing and Urban Affairs (MoHUA), over 1.12 crore collateral-free loans have been provided since the launch.
The loans amount to an impressive ₹17,800 crore, and directly help more than 75.5 lakh street vendors in urban India. This feat is amazing not only because of the financial rewards but also who is receiving them. Prior to 2020, it was difficult for a street hawker to obtain a loan from the bank without collateral or a strong credit score. Today, almost 95% of the beneficiaries of PM SVANidhi are the first to get formal institutional credit.
Once they have a foothold they stay. Independent impact assessment studies have recently revealed that about 30% of these vending outlets have also accessed additional loans of larger size, and not only did the loans come in the form of handouts, but it is an initiative that builds up credit worthiness, too.
Here are the key points to note about PM SVANidhi. Here are some important points to know about PM SVANidhi.
The government has made major improvements to the scheme and extended the scheme until March 2030 as it enters its 7th year. Here are the top attributes that have made it successful:
- It is a trust-based ladder scheme called Progressive, Collateral-Free Loans. The recently overhauled scheme provides for the first loan tranche of ₹15,000 (a rise from ₹10,000 earlier). The vendors who pay back this on time, can immediately avail the second tranche of ₹25,000 and the third tranche of ₹50,000 later. No guarantors or assets are needed.
- The interest rate for loans from local loan sharks was once very high. According to this scheme, the vendor gets a direct interest subsidy of 7% per annum on the loan which is credited quarterly to their bank account.
- Now, if a borrower successfully completes repayment of the loan that is in the second tier, they can now avail the RuPay Credit Card linked to UPI. This card has a basic limit of ₹10,000 that can be increased to ₹30,000.
- Vendors have full flexibility, there are no zero prepayment penalties. They can pay their loans off without paying any hidden charges or penalty fees, and thus have complete control over their cash flow.
The Digital Street Revolution
One of the most noticeable developments resulting from the scheme is the UPI QR code that has been affixed to the front of almost every vegetable stall and tea shop in the nation.
Digital inclusion was not a mere afterthought for PM SVANidhi, but was an important goal. Digital payments are getting financial rewards for vendors, up to ₹1200 annually, just for transacting digitized payments through UPI.
The strategy has been very successful. Today over 55 lakh street vendors are digitally active. Together they have facilitated more than 841 crore digital transactions worth nearly ₹8.96 lakh crore, including PhonePe, Google Pay and Paytm. That digital footprints are just what banks can use to gauge their daily earnings and provide more credit in the future.
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Driving Social Equity at the Grassroots
The money indicators are good, but the soft indicators are what take this scheme to a new level. The data shows a strong push for social equity:
- Nearly 46% of the beneficiaries are women who have full financial independence and control over their businesses.
- The scheme is highly inclusive of marginalized communities with almost 70% of its loan takers hailing from the SC, ST and OBC communities.
In the past few years, independent research has pointed to a growth in beneficiary income of 20% each year. These families are feeling the positive effects of improved cash flow each day, with better housing stability, spending more on healthy food, and more access to health, wellness and education for their kids.
