Credit unlocks minorities’ potential

Across India, the promise of upward mobility still hinges on something as simple as access to timely and affordable credit. For many young people, this single barrier shapes the future course of their education, work, and overall lifestyle. And an absence of accessible credit often translates into stalled aspirations.

Whenever access, capital, and education have flourished, minority communities have been among the architects of the republic’s economic and intellectual foundations. From the Tata Group to Azim Premji, from Kasturbhai Lalbhai’s imprint on higher education to Yusuf Hamied’s transformation of Indian pharmaceuticals, the institutions that anchor India bear the marks of a plural social fabric. Reading these achievements as exceptions obscures the larger point – that they are outcomes of opportunity, not anomalies of identity. Inclusion, then, is the condition under which talent is converted into national capacity.

A wide body of empirical research has consistently shown that several minority communities continue to face outcomes comparable to, or in some cases worse than, other historically disadvantaged groups. In such cases, broader and more equitable access to credit can expand enterprise, employment, and economic contribution. The National Minorities Development and Finance Corporation (NMDFC) was established in 1994, aimed at helping minority communities study further, start small businesses, and take up self-employment through State-sponsored loans.

In response to my question in Parliament, data released by the Ministry of Minority Affairs shows the flow of credit to minority families has been quite limited on the ground. Of the Rs 8,800 crore released over the past three decades, more than 75% has gone to just three states – West Bengal, Kerala, and Tamil Nadu. Most other states have received, on average, barely Rs 3 crore in micro-credit and Rs 63 crore in term loans. Even large states such as Karnataka and Uttar Pradesh, which together account for some of India’s largest minority populations, have fewer than 30,000 beneficiaries under NMDFC schemes.

This limited reach is mirrored in education loans. Between 2019-20 and 2021-22, the NMDFC sanctioned only 513 concessional loans for technical and professional courses. In contrast, the Padho Pardesh scheme, discontinued in 2022-23, supported over 3,500 students annually.

The Government of India’s equity contribution to the NMDFC has dropped sharply, from Rs 160 crore in 2019-20 to Rs 61 crore in 2023-24. This decline in support reflects a clear shift in priorities and a growing reluctance on the part of the Centre to bear any risk. Such risk appetite hits rock bottom when it comes to the poor, even as the State routinely underwrites credit for large corporate interests.

Painstaking work is required to make access to resources genuinely democratic; it takes more than rhetoric. What is needed is a change in organisational thinking, one that recognises credit for the poor not as a liability, but as a public investment. Viable lending models exist, from community-based institutions to cooperative and self-help-driven frameworks, that demonstrate how risk can be shared, monitored, and reduced. Scaling such models requires the Centre to reclaim its role as a risk-bearing guarantor of inclusion, to partner with institutions willing to take calculated risks for the public good.

Partners in progress

Large sections of minority communities remain outside the reach of formal credit networks, relying largely on informal lenders. First, the network itself must be expanded. Institutions like the Self-Employed Women’s Association (SEWA) meet strong demand for loans while operating with the trust and confidence of their communities. Their experience exposes the gaps in formal credit delivery, offering lessons for the State on what is missing. Partnerships with colleges, universities, minority industry chambers, and insurance providers willing to share risk can help extend reach where government capacity is limited.

Second, providing loans is not enough. Active monitoring, mentoring, and managerial training are essential to ensure that credit is effectively utilised, repayment is maintained, and enterprises thrive. This requires going beyond the traditional role of a bank; borrowers must be guided and supported, not simply handed money. In doing so, credit becomes not a transaction, but a tool for empowerment.

Moving a resolution on minority rights at the Haripura Congress session on February 20 1938, Nehru had recognised a simple truth: economic hardship affects all people the same, and such material insecurity is what matters to them. For Nehru, India’s progress depended on a genuine sense of belonging for all minorities. Today, with limited credit flows and shrinking government contributions leaving the promise of minority welfare largely on paper, his vision remains urgent. We must empower institutions to ensure that minority communities can participate fully and meaningfully as equal partners in the nation’s progress.

(The writer is a retired IAS officer and Congress Lok Sabha member from Raichur)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.