Home >Opinion >Columns >Opinion | Balm for poor migrants and access to finance for small entrepreneurs
Photo: PTI
Photo: PTI

Opinion | Balm for poor migrants and access to finance for small entrepreneurs

The success of the loan will be dependent on the speed with which MFIs can provide credit

The finance minister continued to balance fiscal discipline and the need for stimulus with the fiscal impact of the announcements made on Thursday limited to about 4,000 crore. The total stimulus package announced on Thursday was to the tune of 2.46 trillion, thus giving visibility to 8.4 trillion of the stimulus package.

Some of the measures announced would give immediate relief to the poor migrants and especially those who do not have ration cards.

However, the onus of implementation is with the state governments and it will be the speed and efficiency of the state governments that will determine the level of distribution that we will witness over the next few weeks.

One option for the states is to collaborate with the civil society organizations and informal networks that have been helping the migrant workers. They have developed the reach and the states should piggy back on them to get the relief fast.

One of the challenges that migrants are facing is that they have run out of fuel to cook. Thus, a scheme to provide one-time refill vouchers for their cylinders could also be explored by the government.

The announcement of the ‘one nation, one ration card’ is a great move for the migrants who lose out on the benefits because they hardly stay for a long duration in one location or their home towns and villages.

They will now be able to draw their entitlements at any location. This is a measure that will provide relief to the migrants over the long term.

The government also announced an intensive drive to enrol migrants aggressively at their home locations under MGNREGS (Mahatma Gandhi Rural Employment Guarantee Scheme) so that they do not go without income.

This however will be an additional challenge of labour availability as the motivation to return will be lower.

It will also lead to possibly higher wages for the industry to be able to attract them and also increased costs by way of being able to provide them with safe accommodation.

The interest subvention of 2% for next 12 months on the Mudra Shishu loans of up to 50,000 is a good measure for helping self-help groups and very small entrepreneurs. However, given the economic condition, the ability of these borrowers to be able to service these loans even with the lower interest rate will need to be seen.

Similarly, the easy access to credit for the street vendors and a 5,000 crore allocation for the same is going to help them immensely as the cost of daily credit to these vendors from the money lenders is immense.

However, the success of this loan will be dependent on the speed with which microfinance institutions (MFIs), which have the maximum reach to this base, can move to provide this credit. The risk appetite of the banks and MFIs will be key as these will not be guaranteed. However, if this is accompanied with suitable financial literacy measures for the vendors to service it and create a credit history, it will solve their access to finance and cost of finance issues forever.

Ranen Banerjee is leader, economic advisory services at PwC India. The views expressed are personal.

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