PM-SVANidhi boosted annual income of street vendors


09:08 AM

1 min read
PM-SVANidhi boosted annual income of street vendors Blog Image

What’s in today’s article?

  • Why in news?
  • What is the PM SVANidhi Scheme?
  • News Summary: The study

Why in news?

  • A study looked at how the PM Street Vendor’s AtmaNirbhar Nidhi (PM SVANidhi), a loan scheme for street vendors, affected their income.
  • It found that the first loan of ₹10,000 increased the yearly income of each beneficiary by ₹23,460.

The PM SVANidhi Scheme

  • About
    • It was launched in 2020 amid the pandemic by the Ministry of Housing and Urban Affairs (MoHUA), Government of India.
    • It is a micro-credit facility that provides street vendors a collateral-free loan of Rs 10,000 with low rates of interest (below 12%) for a period of one year, aiding the vendors at getting back on their feet financially.
    • In the long term, it aims at -
      • Establishing a credit score for the vendors
      • Creating a digital record of their socio-economic status
    • This will enable street vendors to avail the Central government schemes later, formalise the informal sector of the economy and provide them safety nets and a means of availing loans in the future.
  • Need for the Scheme
    • Many vendors belong to the informal economy, and often borrow from private lenders which charge them exorbitant rates of interest.
    • The COVID-19 pandemic and the nationwide lockdown left daily wage workers and street vendors out of work.
  • Eligibility
    • All vendors who have been vending from or before (March 24, 2020) and with a certificate of vending can avail the loan.
    • As per the Street Vendors Act 2014, the Town Vending Committees (which comprises the local authorities and vendors from an area) issue a certificate of vending after a survey has been conducted of all the vendors.
  • Performance of the scheme
    • Data on the PM-SVANidhi portal (February 10, 2024) showed that 60.65 lakh first-term loans, 16.95 lakh second-term loans and 2.43 lakh third-term loans have been disbursed so far under the scheme.

News Summary: The study

  • About
    • The study was commissioned by the Union Ministry of Housing and Urban Affairs.
    • It was carried out between January and June 2023 by the Centre for Analytical Finance of the Indian School of Business (ISB).
    • The report will be used by the Ministry for its own assessment of PM SVANidhi and is not likely to be made public
  • Findings
    • 94% of those beneficiaries who had availed the first loan of Rs 10,000 said they used it to make business investments.
      • It was 98% in case of those who had availed the second loan.
    • The first loan resulted in an additional income of 1,955 per month, or 23,460 in total during the loan’s one-year duration.
    • The study found 13.9% of all the loans disbursed had been classified as non-performing assets (NPAs), meaning no payments had been made for three months and more.
    • The study discovered that the debt-to-income (DTI) ratio of the beneficiaries was lower than what small businesses typically have.
      • This indicates that the vendors are considered highly creditworthy.
    • Additionally, the study revealed that even after the PM SVANidhi program started, there was not much improvement in street vendors accessing formal credit from other sources.
      • Only 9% of the beneficiaries had loans from other financial institutions.

Q1) What is debt-to-income (DTI) ratio?

A debt-to-income (DTI) ratio is a percentage that compares your total debt payments to your gross income. Lenders use this ratio to determine your creditworthiness and ability to repay loans.

Q2) What is micro-credit?

Microcredit is a type of microfinance that involves giving small loans to individuals or groups who lack access to formal banking systems. The loans are typically short-term, with a repayment period of 1-2 years.

Source: PM-SVANidhi boosted annual income of street vendors by Rs 23,000: Study | Ministry of Housing and Urban Affairs