6 Small Business Grants For Minorities

As a minority, at times, it is tougher to start a business. Therefore, the government has initiated various schemes to help minorities to start a business of their own.

In 1994, the Ministry of Minority Affairs started the National Minorities Development and Finance Corporation (NMDFC) with the goal of encouraging economic activity among the underprivileged groups of recognised minorities. The NMDFC recognises Muslims, Christians, Sikhs, Buddhists, Parsis and Jains as minorities currently.

To be sure, being from a minority community alone does not automatically assure a loan; the applicant also needs to be earning below a certain threshold to be able to avail the benefits.

According to the Reserve Bank of India guideless, one-fourth of the priority sector lending target of banks should be to weaker sections including minority communities. The RBI has also asked banks to monitor credit flow to minorities in 121 districts to ensure that they get a fair share within the overall target of the priority sector.

Banks have also been asked to route loans under the Differential Rate of Interest scheme through State Minority Finance Corporation on the same terms as are applicable to loans routed through Scheduled Castes and Scheduled Tribes Development Corporations. Under the Differential Rate of Interest scheme, banks provide loans up to Rs 15,000 at a concessional rate of interest of 4% to weaker sections.

Here are some of the specific loan schemes available for minorities:

Term Loan Scheme

This scheme, offered through state channelizing agencies of the NMDFC, serves individuals. Under the scheme, projects with cost of up to Rs 20 lakh are eligible for financing. NMDFC offers loans up to Rs 18 lakh, covering 90% of the project cost. The remaining cost is to be borne by the state channelizing agency and the beneficiary. The recipient will be charged interest at 6% per annum on a reducing balance method. The moratorium period for this scheme is six months.

The Term Loan Scheme can be utilized for any commercially viable venture in agriculture and allied sector, technical trades sector, small business sector, artisan and traditional occupations sector, and transport and services sector.

Micro Financing Scheme

The Micro Financing Scheme offers micro-credit to participants of Self-Help Groups aiming to help minority women in rural villages and urban slums unable to utilize formal banking credit and NMDFC schemes. This scheme is executed through state channelizing agencies of NMDFC and NGOs. Under the scheme loan of up to Rs 1 lakh is provided per member of the self-help group. The rate of interest on the loan cannot exceed 7% per annum and the moratorium period is three months.

Mahila Samridhi Yojana

The Mahila Samridhi Yojana is a scheme that offers training to women members of a self-help group and provides need-based micro credit afterwards. This scheme is carried out by state channelizing agencies of NMDFC and NGOs.

The scheme ensures training is imparted to a group of about 20 women in any craft or activity. The maximum training period is for six months, with a cost cap of Rs 1,500 per trainee per month. The trainees are also awarded a stipend of Rs 1,000 during training. On completion of training, Rs 1 lakh is provided as micro credit per member of the self-help group based on needs. The interest on the micro credit is 7% per annum.

Virasat Scheme

The Virasat Scheme is aimed at helping artisans to meet their credit needs. It helps artisans to meet working capital and fixed capital needs. It is a part of the Term Loan scheme and is carried out by the state channelizing agencies.

Under this credit line, artisans can borrow up to Rs 10 lakh at an interest rate of 5-6% per annum for male artisans and 4-5% per annum for female artisans. The moratorium period for the loan is six months. The NMDFC provides 90% of the funding for this scheme, with the artisans having to contribute at least 5%.

Stand Up India

Stand Up India Scheme is aimed at financing those belonging to scheduled caste (SC) and scheduled tribe (ST) categories and women entrepreneurs. Under the scheme, a loan between Rs 10 lakh and Rs 1 crore is given to at least one person per bank branch. Only greenfield projects in manufacturing, services, agriculture-related activities, or the trading sector are applicable for this loan.

The majority stake of the enterprise needs to be held by an SC/ST or woman entrepreneur. The rate of interest on this loan does not exceed the base rate (Marginal Cost of Funds Based Landing Rate) plus 3% plus the tenure premium. The maximum moratorium period for the loan is 1 year and six months.

Conclusion

There are also other schemes that minorities and those from disadvantaged backgrounds can apply for. The RBI has also allowed banks to provide credit facilities to non-banking finance companies for on-lending to priority sectors.

If, for some reason, aspiring entrepreneurs are unable to secure any of the grants specified above, they can seek personal loans or unsecured business loans from a large number of banks and non-banking finance companies.

For instance, IIFL Finance provides personal and business loans through an online application process at reasonable interest rates. IIFL Finance offers unsecured business loans of up to Rs 30 lakh and personal loans of up to Rs 5 lakh, without any collateral, through a hassle-free approval process that requires minimal paperwork.