Margin money subsidy
Also called: MM subsidy · Topic: Industrial Policy, Public Sector, MSMEs and Disinvestment · NCERT: Beyond NCERT
Meaning
A margin money subsidy (MM subsidy) is government help given as a fixed share of a project's cost. It is not paid as cash in hand. The money is linked to a loan that a bank has already approved, so the entrepreneur repays less. This is called a credit-linked subsidy. The entrepreneur must also put in a small amount of their own money, called the own contribution. Because a bank first checks whether the project can work, public money goes only to units that pass that check. India's main example is the Prime Minister's Employment Generation Programme (PMEGP), launched in 2008 and run by KVIC. It funds new non-farm micro-enterprises.
Example
Under PMEGP, a general-category borrower gets 25% of project cost in a rural area and 15% in an urban area. Special categories get 35% (rural) and 25% (urban). These include SC/ST, women and the North Eastern Region. Take a woman who sets up a ₹10 lakh rural unit. She pays 5% (₹50,000) herself and the bank lends the rest. The government's subsidy of ₹3.5 lakh is adjusted against that loan.
Don't confuse with
- Direct grant: a grant is paid to the person whether or not a bank lends. An MM subsidy exists only alongside a bank-approved loan.
- Own contribution: this is the entrepreneur's own money in the project (10% general, 5% special category under PMEGP). It is not government help.