# Does Microfinance Drive Entrepreneurship? Evidence from India’s Microfinance Scheme (PMMY)

**Source**: https://urss.warwick.ac.uk/items/show/1049
**Parent**: https://urss.warwick.ac.uk/

### Title

Does Microfinance Drive Entrepreneurship? Evidence from India’s Microfinance Scheme (PMMY)

### Subject

Development Economics – Microfinance and Enterprise Growth

### Date

2025

### Contributor

Aayush Bhandari

### Abstract

This study examines the impact of the Pradhan Mantri MUDRA Yojana (PMMY) on enterprise creation in India, addressing a gap in the literature that emphasises loan trends rather than causal outcomes. Using panel data from 33 states and union territories between 2011–2021, fixed-effects regressions estimate the relationship between per-capita PMMY disbursements and MSME registrations. The results show a marked rise in MSME formation after the scheme’s launch in 2015, with per-capita lending associated with nearly one additional MSME per 1,000 people in the following year. This relationship remains robust after controlling for income, banking infrastructure and national shocks, though significant variation exists across states. Wealthier states display stronger impacts, while poorer or infrastructure-constrained regions benefit less. Interviews with beneficiaries support these patterns, indicating that although PMMY improves credit access, sustained enterprise growth also depends on market access, financial literacy and broader institutional support.

### Meta Tags

Economics, Development Economics, Policy Evaluation, Microfinance

### Files

### Collection

[Social Sciences](https://urss.warwick.ac.uk/collections/show/1)

### Citation

Aayush Bhandari, “Does Microfinance Drive Entrepreneurship? Evidence from India’s Microfinance Scheme (PMMY),” *URSS SHOWCASE*, accessed March 16, 2026, https://urss.warwick.ac.uk/items/show/1049.

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