National Minorities Development and Finance Corporation (NMDFC), a Central Public Sector Enterprise under the Ministry of Minority Affairs, offers concessional loans/schemes to minorities to provide financial support to their business. Minority Business Loans have been a boon to the minorities giving a great relief to such entrepreneurs. Let’s read on to learn more about it.
Individuals in the general category received the majority of loan amount disbursed at 68%, followed by women at 44%, and those borrowing for the time at 33%. Scheduled caste and scheduled tribe individuals received 12% of the loans sanctioned during FY 2018-19.(1) Private banks and non-banking finance companies outscored public sector financial institutions when it came to lending.
The figures above are indicative of how getting a business loan can be a struggle for those who belong to a minority community, especially in the challenging economic scenario prevailing today. Small business owners have been the worst affected by the countrywide lockdown this year in the wake of the pandemic forcing them to shut their shops.
Projections of a negative GDP growth in 2020-21 by economists have further dampened the entrepreneurial spirit with little or no hope of recovering lost business. However, if you are a small business owner who is a part of a minority group, there are relief options available especially for you. This is because you can avail small business loans for minorities at discounted rates and support your enterprise in such tough times.
What is a Business Loan for Minority?
Business Loans for minority are concessionary loans offered to the minority people who wish to build up their business but lack funding for the same. According to the NMC (National Commission for Minorities) Act, the Muslims, Christians, Zoroastrians, Buddhists, Sikhs and Jains are counted as minority communities. However, being part of a minority group does not guarantee you the loan concession. It will be given to only those who need it the most. And to evaluate this, your annual income will also be considered.
Providing Business Loans for Minorities
The National Minorities Development and Finance Corporation (NMDFC) was founded in 1994 with a mission to provide financial support to those who fall in the backward category within minorities and want to build a business. NMDFC is a joint venture that is supported by the state governments and union territories along with the Government of India. Religious minorities are the target group of NMDFC and qualify for a minority business loan, apart from women and other occupational groups as well. Sikhs, Christians, Parsis, Muslims, Buddhists and Jains are classified as religious minorities as per the National Minorities Commission Act 1992.
Concession in loan disbursement is not decided by your minority status alone. The annual income of the family is also assessed before making the decision to give out the loan. Each state and Union Territory in India has a definite share of credit to be given in proportion to its population. A network of NGOs or self-help groups as well as state channelizing agencies help NMDFC reach out to the needy beneficiaries. By the end of 2019, the paid-up share capital of NMDFC stood at Rs. 2077. 51 crores out of which Rs. 1700 crores was contributed by the Government and the remaining by the states and union territories.
Government Business Loans for Minorities
The Reserve Bank of India has authorized a special cell to be operated by the Assistant/Deputy General Manager of the Banks. The government ensures that all commercial banks offer 10 percent priority sector lending for the minorities. The Directorate of Revenue Intelligence (DRI) scheme allows the minority communities to avail loans from the banks.
The Ministry of Minority Affairs, an initiative of the Government of India has established the National Minorities Development and Finance Corporation (NMDFC). The NMDFC was established under Section 25 of the Companies Act on 30th September 1994 which is now under Section 8 of Companies Act, 2013. The share capital of NMDFC has risen from 500 crores to a whopping 3000 crores. Under this Act, women and artisans are given prime importance.
Thus, Government Business Loans gives equal rights to cash flow to the minority communities of the country.
The list of Minority loans which can be used for business in India and their features are as follows:
| Minority Loans | Maximum Limit | Interest Rate Per Annum |
| Term Loan | 20 lakh | 6% (female beneficiaries) |
| 30 lakh | 8% (male beneficiaries | |
| Micro Finance | 1.5 lakh | Max. up to 8% |
| 1.5 lakh | 10% |
Types of Business Loans for Minorities
There are various lending schemes offered by the NMDFC such as:
1. Term Loan
A minority business loan is given on individual basis through State Channelising Agencies or SCAs under this scheme. Rate of interest to be paid by beneficiaries varies for men and women. A maximum of Rs. 30 Lakhs can be availed to finance your business for those falling under Credit Line 2, while minorities classified as per Credit Line 1 can get upto Rs. 20 Lakhs. Rate of interest to be paid by beneficiaries is a flat 6% under Credit Line 1 for both men and women whereas men need to pay a higher 8% interest if they avail credit in the Credit line 2 category. A 6 month moratorium period and 5 years of repayment tenure is available to all beneficiaries. SCAs are allowed to repay within 8 years at a rate of interest of 3% under both lines of credit. The reality of the minority family on ground is advised to be the basis for doling out financial support and thereby sanctioning of the loan by the SCA.
2. Virasat Scheme
Artisans who want to purchase tools or machinery to carry their business and are in need of either working or fixed capital can easily avail up to Rs. 10 Lakhs as small business loans for minorities provided under this scheme. While men need to pay 5% interest, women are given a discount of 1% and need to pay only 4% interest per annum. A moratorium period of 6 months and repayment of upto 5 years applies. SCA’s are provided an 8 year repayment tenure with an interest rate of 3% for men and 2% for women.
3. Micro-Finance
This scheme has particularly benefited women in far flung remote areas who neither have access to avail basic banking facilities or SCAs. Despite their hardships, they still want to be financially independent. Micro credit is extended to such women through the network of self-help groups(SHGs) spread in villages and slums in cities to provide informal economic support and enable doorstep delivery of credit. A maximum of Rs. 20 Lakhs can be availed by a group of 20 women in an SHG under credit line 1 and Rs. 30 Lakhs for those falling under Credit Line 2 with a flat interest rate of 7% for all in the former and 10% for men and 8% for women in the latter. Repayment tenure stands at 3 years for both. NMDFC charges a flat rate of interest from SCAs or NGOs which in turn levy interest on SHGs as applicable for both lines of credit.
How to avail Minority Loans?
You can apply for minority business loans in India online as well as offline. You can check your eligibility criteria on the website of the Ministry of Minority Affairs and fill out the online application forms. You can also check out financial providers for minorities and specific bank loan schemes. You can apply online, check out the EMI and find the best interest rates for your loan on the website of the provider you choose. Apart from the schemes mentioned above, there are many promotional schemes to motivate the urge of self-employment among the minorities. Such schemes include training and assisting aspiring entrepreneurs for skill development to establish a successful business.
Where to get a Business Loan?
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