PM SVANidhi: Micro Credit Scheme for Street Vendors

Introduction
During the unprecedented global pandemic, the informal sector of India suffered heavily from the progressive COVID-19 lockdowns. The employment and income of informal workers, especially in the urban sectors were lost antagonistically impacting the occupation of road sellers, hawkers, and street vendors. Street vendors are a crucial part of the urban informal economy and help ensure that city residents have access to goods and services at reasonable prices right outside their front doors. The government of India introduced the PM Streets Vendor’s Atma Nirbhar Nidhi (SVANidhi) scheme in June 2020 to provide monetary assistance to these road sellers. Under the centrally sponsored scheme, the PM SVANidhi provides subsidized working capital loans of US$ 122.08 (Rs 10,000) to every eligible beneficiary.  A total number of 31.73 lakh street vendors had benefited from the first loan of US$ 122.08 (Rs 10,000) and 5.81 lakh of them had benefited from the second credit of US$ 242.51 (Rs 20,000) as of November 2022. Moreover, 6,926 of those who had benefited from the second loan had also benefited from the third loan of US$ 606.28 (Rs 50,000). Also, benefits under the PM SVANidhi Scheme are estimated to be distributed to additional 42 lakh street vendors by December 2024.

PM SVANidhi Yojana

This is a central sector scheme supported by the Ministry of Housing and Urban Affairs. Street vendors in urban areas will be able to apply for Working Capital (WC) loans of up to Rs 10,000 with a tenure of one year, repaid in monthly payments. No collateral is taken by the lending institutions for this loan.

Objectives

• To facilitate working capital loans of up to $10,000
• To encourage regular repayment
• To reward digital transactions.

Eligibility

• Street vendors who have been issued a Certificate of Vending or Identity Card by Urban Local Bodies (ULBs).
• Vendors who have been identified in the survey but have not yet received a Certificate of Vending or Identity Card; for these vendors, a provisional Certificate of Vending will be generated through an IT-based platform. The permanent Certificate of Vending and Identification Card should be issued to such vendors by ULBs immediately and positively within a month.
• Street vendors who were not included in the ULBled identification survey or who began selling after the survey was finished and received a Letter of Recommendation (LoR) to that effect from the ULB / Town Vending Committee (TVC).
• The vendors from nearby developments, peri-urban areas, and rural areas sell within the ULBs' geographic boundaries and have been issued a Letter of Recommendation (LoR) to that effect by the ULB / TVC.

Benefits

• Collateral-free loan: The total amount is Rs. 10,000, and there are no security requirements in order to obtain the loan amount. Candidates have a chance of receiving a sizable loan with prompt repayment. For instance, if the applicant completed all the loan payments on time, they would be given the choice to borrow a substantial amount the next time they needed a loan.
• Interest subsidy: A 7% interest rebate is due from merchants who take out working credit loans through the PM vendor programme. This sum shall be paid to debtors on a quarterly basis. The end of this interest subsidy is March 31, 2022.
• Hassle-free application process: In general, applying for a loan is a difficult endeavour, but the central government offers a simple application process for this loan programme. To apply for this loan, users must go to the SVANidhi Yojana website and provide the necessary information.
• Cashback incentives: Users who choose digital transactions can take advantage of reward promotions. With the assistance of a sizable network of reputable banks and digital payment providers, vendors can embrace digital methods.
• Easy to check loan status: On the official website of this programme, the central government yojana also gives you access to check the status of your loan application. The user must provide their login information, which they receive upon applying for this loan, along with their password. Anyone can, at any time and from anywhere, check the status of their loan application within just a couple of minutes through their login credentials.

As depicted in the below graph, according to the PMSVANidhi portal, 46,77,412 loans have been sanctioned out of 61,63,113 eligible applications and 41,00,220 loans have been disbursed as on 6th February 2023.

Source: Prime Minister Street Vendor AtmaNirbhar Nidhi Dashboard.

Other Microfinance Initiatives

• Deendayal Antyodaya Yojana - National Rural Livelihoods Mission (DAY - NRLM)

In order to organise rural poor women into Self Help Groups (SHGs), DAY – NRLM continuously nurture and support SHGs until they achieve a desirable increment in incomes over time, improve their quality of life, and escape extreme poverty. As of June 30, 2022, more than 76.94 lakh women were a part of SHGs out of roughly 8.39 crore rural poor women. In Punjab, more than 33,500 SHGs have been formed out of more than 3.4 lakh rural poor women.

• National Rural Livelihood Mission (NRLM)

The NRLM's primary goals are to develop and sustain a framework focusing at all levels on the poor, to improve the already-existing institutions, and to put in place a targeted, sensitive support system from the national to sub-district level. Members of the Self-Help Promoting Sa-Dhan are playing an essential in advising the NRLM and supporting the consolidation of SHGs and their federations to converge with the NRLM.

• Women's Self-Help Group (WSHG)

The WSHG scheme was introduced by the Ministry of Finance (MoF), to support and finance women's Self-Help Groups (SHGs). It will be implemented in 150 most underdeveloped and Left Wing Extremist (LWE)-affected districts of the nation by partnering with the selected NGOs through the Lead bank of that particular district. This program anchors several Sa-Dhan member NGOs, they would be providing critical feedback to the concerned department.

Microfinance in India

In a developing nation like India, there is a need to support low-income families as well as uplift and provide them with a better standard through supporting them financially in a more efficient way, and there came the concept of "microfinance," which is a form of financial service that provides small loans and other financial services to poor and low-income households in a consistent and legitimate way. The idea of "microfinance," a type of financial service that offers small loans and other financial services to poor and low-income households in a consistent and legitimate manner, emerged from the need to support low-income families in developing nations like India as well as uplift and provide them with a better standard through supporting them financially in a more efficient way. It is an economic instrument created to encourage financial inclusion, which enables low-income and impoverished households to escape poverty, raise their income levels, and generally improve their standard of living. It can make it easier to implement national policies aimed at raising living standards, empowering women, reducing poverty, and supporting vulnerable populations. In general, India uses one of two techniques to expand microfinance services:

• The Self-Help Groups-Bank Linkage Program, a bank-led strategy (SHG-BLG),
• The strategy driven by Micro Finance Institutions (MFIs)

There are many different companies offering low-income people financial services like loans, insurance, and pensions in India's microfinance business.

To categorize the numerous microfinance industry participants, there are five major categories that can be used: Banks, NBFC-MFIs, Small Finance Banks, and Non-Profit MFIs. With the exception of non-profit MFIs, all of these fall under RBI jurisdiction.

The bulk of non-profit MFIs are incorporated as trusts or societies and are subject to the laws governing those entities.

The majority of non-profit organisations (NGOs) that have been acting as financial intermediaries in the business are trusts or societies that are legally recognized.

Objective of Microfinance

It has been suggested to launch a pilot programme to identify SHG members, foster their entrepreneurial potential, enable credit linkage, and promote market linkage. This is done in order to:

1) Advance microentrepreneurs who operate consistently, without seasonal swings, with larger capital, more labourers, and better technology.

2) The acquisition of new skill sets, as well as helping first-generation businesspeople and modernising existing firms' operations.

3) Holding a programme for trainers to support and scale up new ventures among SHG and JLG members.

4) Giving underserved states in different parts of India extra attention.

5) Launching digital banking for SHGs in partnership with banks to keep track of ongoing revisions to both financial and non-financial data on the portal.

Importance of Microfinance

In our nation, almost 50% of people lack a simple savings account. However, to achieve their goals of wealth accumulation and risk mitigation, they need financial services. Individuals with limited access to capital can do so thanks to microfinance. These groups would have turned to borrow money from friends or family if microfinance organisations had not been providing loans to this section of society. They have a greater likelihood of choosing payday advances or fast cash loans, both of which have extremely high-interest rates. Microfinance supports the government's goal of financial inclusion in the nation by assisting these groups in making informed investments in their enterprises.

Features of Microfinance

• The loans obtained through microfinance are often of small amounts or microloans
• The borrowers are generally from low-income families
• Microfinance loans have no or minimal collateral requirements
• Microfinance loans typically have shorter loan terms
• These loans are usually paid at higher frequency repayment schedules
• In most cases, these loans are used to generate income for low-income families

Types of Microfinance Loans

• Microloans

They are a type of unsecured loan given to borrowers without any collateral. When a bank provides a loan, collateral is a sort of security that is pledged with the bank, but in this case, the borrower is not required to provide any specific type of security as collateral. It is a sustainable method that enables better overall repayment of debt. Therefore, it increases the likelihood of future investments.

• Micro savings

In this type of account, borrowers are permitted to operate their savings accounts with no minimum balance required. Since users are not required to maintain a specific quantity of money in their accounts, people with low-income and small accounts can benefit from micro-savings. It instils financial discipline in people and aids in the development of saving habits.

• Microinsurance

It is a type of protection offered to borrowers of microloans. The importance of microinsurance is that it is a mechanism that safeguards people against any mishap that might occur in the future. It covers every danger that low-income earners experience globally.

Progress of Microfinance Programs

Source: Reserve Bank of India (RBI)

Note: Figures in brackets give the details of SHGs covered under the National Rural Livelihoods Mission (NRLM) and the National Urban Livelihoods Mission (NULM) for 2017-18, 2018-19, 2019-20, 2020-21, and 2021-22, respectively.

Road Ahead
Street Vendors and Hawkers are vital economic activities in the urban areas of India. In fact, one can say that it is one of the largest informal sectors indulging in economic activity that caters to the livelihood of the urban poor. Government initiatives like PMSVANidhi, address the concerns of the urban street vendors by facilitating access to suitable space, financial credits, and social security leading to improved quality of life. In India, microfinance is crucial for achieving financial inclusion for the underprivileged, living in both urban and rural areas. If handled in an effective manner, microcredit can significantly contribute to the underprivileged by reducing poverty. Schemes like PMSVANidhi brings financial mainstreaming through loans, promoting digital transactions through cash-back initiatives and strengthening them to be self-reliant in the long run.