Mahila Udyam Nidhi Scheme: Eligibility Criteria, Features & Benefits

The Mahila Udyam Nidhi (MUN) Scheme was launched by IDBI (Industrial Development Bank of India) in 1987 and has been operated by SIDBI (Small Industries Development Bank of India) since April 1990.

This scheme offers financial assistance and credit facilities to women entrepreneurs at concessional interest rates. If you plan to start a business or expand your existing one, this scheme can provide valuable support for your funding requirements. This blog will tell you more about the scheme’s eligibility, features, and benefits.

What is the Mahila Udyam Nidhi Scheme?
 

The MUN scheme aimed to provide women entrepreneurs with soft loans, or quasi-equity, so they could start new industrial projects that didn't require startup capital of more than ₹10 Lakh. SIDBI withdrew this scheme on October 1, 2009. During its operation, 2,328 female entrepreneurs benefited from the ₹13.09 crore in financial aid that was disbursed. 

By focusing on female entrepreneurs, the MUN Scheme intended to empower women both financially and socially, in addition to increasing economic participation.

Features of the Mahila Udyam Nidhi Scheme

Now, let’s understand the key features of this scheme to know how it offers valuable support to women entrepreneurs:

1.    Loan Amount: Beneficiaries of this scheme can obtain a loan of up to ₹10 Lakh.
2.    Collateral-free: In this scheme, female entrepreneurs are not required to pledge any security or collateral in exchange for a loan.
3.    Interest Rates: Loans under this scheme are offered at affordable interest rates. It depends on the applicant’s credit score, project location, project cost and business type.
4.    Fund Use: Funds from this scheme can be utilised for various business activities such as production, manufacturing, and service-related business operations. They are also helpful in improving existing technology and manufacturing facilities.
5.    Loan Limit: Loans under this scheme can be availed up to 25% of the total project cost, with an upper limit of ₹2.5 Lakh per project.
6.    Repayment Tenure: Along with the option to extend the loan moratorium for an additional five years, this scheme provides flexible payback terms of up to ten years.
7.    Service Charge: This scheme has a service fee of 1% per annum. It can vary or be waived at the discretion of the lending authority.
8.    Fund Disbursement: Under this scheme, the loan amount is approved by SIDBI and then distributed by NBFCs, microfinance organisations, or traditional lending institutions.

Eligibility Criteria for Mahila Udyam Nidhi Scheme

Wondering whether you’re eligible for this scheme? Here are the eligibility criteria:

1.    MSME, Tiny Units, or Small-Scale Industries (SSI) must be started or operated by women entrepreneurs.
2.    At least 51% of the funds invested in the business should be owned by female entrepreneurs.
3.    Businesses in manufacturing, production, services, or trading sectors are eligible.
4.    The scheme is available to MSMEs with a minimum investment of ₹5 Lakh.
5.    The funds obtained from this scheme can be used for specific activities such as business expansion, diversification, improvement, and technology upgradation.

Approved Business Activities Under Mahila Udyam Nidhi Scheme

Under this scheme, funds can be utilised only for specific approved activities. Here is the list of such activities:

●    Auto-repairing and servicing centre
●    Running a daycare centre
●    Operating an ISD/STD booth
●    Providing laundry and dry cleaning services
●    Offering TV repair services
●    Managing a canteen or restaurant
●    Running a crèche
●    Servicing agricultural and farm equipment
●    Tailoring
●    Operating a cyber café
●    Managing a beauty parlour
●    Running a salon
●    Operating a typing centre
●    Providing mobile repair services
●    Repairing washing machines and other electrical appliances
●    Running a photocopying (Xerox) centre 
●    Purchasing and operating autorickshaws, cars, and two-wheelers for commercial use
●    Managing a cable TV network
●    Operating as a road transport operator
●    Offering computerised desktop publishing services
●    Running training institutes

Benefits of the Mahila Udyam Nidhi Scheme

Let’s explore the various benefits offered by this scheme to women entrepreneurs:

1.    Mahila Udyam Nidhi scheme provides soft loans of up to ₹10 Lakh, which helps women start ventures like tailoring shops, beauty parlours, or cyber cafés without searching for other credit options.
2.    The concessional interest rates of this loan help women entrepreneurs to reduce their repayment burden.
3.    It encourages women to become self-employed and financially independent by starting and growing their own businesses.
4.    Women have real decision-making authority in their businesses, as they need to have 51% business ownership.
5.    This scheme allows the use of the funds for business diversification or technology upgradation, helping women remain competitive in the business world.
6.    Obtaining a loan through this scheme helps women build a formal credit history, improving access to future funding.
7.    The women-led ventures create local employment opportunities, especially empowering other women. This also enhances their social and economic standing within families and communities.

Tentative Application Process for Mahila Udyam Nidhi Scheme

This scheme is no longer offered by SIDBI and has been discontinued by most institutions. However, women entrepreneurs can apply for this scheme through PNB, which still supports it through its MSME loan program. 

Here are the steps to apply for a loan:

1.    Visit the Website:
To begin the application procedure, go to the official PNB website.

2.    Browse Through MSME Schemes:
Go to the search bar on the homepage and enter ‘Mahila Udyam Nidhi Scheme’. Click on the search button to proceed.

3.    Access the Application Form:
You will be redirected to the application form page for the Mahila Udyam Nidhi Scheme. Fill out the form manually after downloading it.

4.    Fill Out the Form: 
The application form to fill out begins on the second page. Enter details of documents for business loans, such as Unit/Applicant names, Registered Office Address, Factory/Shop/Business Address, and complete contact information, including phone number, PAN card, email ID, and Udyog Number.

5.    Enter Collateral Details:
If collateral is required based on the loan amount or the bank’s policy, please provide the necessary information.

6.    Provide Details of Business Performance:
You need to enter details of your business's past performance and specify future estimations.

7.    Specify Statutory Obligations:
Select the appropriate option for statutory obligations.

8.    Add Photograph and Signature:
Insert your signature and photo where required in the form. 

9.    Submit the Form:
Ensure that you have included all the relevant information and attached the necessary documents by carefully reviewing the form. Enter the date, sign the form and visit the nearest branch for further processing. 

Read Also: How Can Women in India Avail of a Loan to Expand Their Business?

To Conclude 

The Mahila Udyam Nidhi Scheme is a powerful enabler for women entrepreneurs, offering collateral-free loans, flexible repayment options, and support for a wide range of business activities. It encourages financial independence, promotes entrepreneurship, and helps women build sustainable ventures.

If you're a woman entrepreneur ready to launch or grow your business, take the next step by exploring MSME loan schemes like Mahila Udyam Nidhi and unlock new opportunities with Poonawalla Fincorp for growth and success. Visit the Poonawalla Fincorp website to start your application today. 

Frequently Asked Questions

What are the other benefits offered by this scheme?
In addition to providing financial advantages, the scheme intended to empower women economically and socially. Also, it aimed to enhance their ability to make decisions and create job opportunities in the local area.

Could first-time business owners apply for a loan under this scheme?
Yes, with soft loans and no collateral, the scheme allowed first-time female entrepreneurs to launch their own businesses.

Were businesses from all sectors eligible for funding under the scheme?
The scheme primarily focused on small-scale manufacturing, service, and trading sectors suitable for micro and small enterprises.

Was prior business experience compulsory to apply under this scheme?
No, prior business experience was not compulsory. The scheme encouraged first-time women entrepreneurs to start their ventures by offering adequate financial support.

Was it possible to use the loan money to buy equipment or cars for business use?
Yes, the scheme allowed the use of the funds to meet operational needs by buying business-related assets like machinery, vehicles, or autorickshaws.