Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) Scheme

Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) Scheme

The CGTMSE scheme has recently approved enhanced credit guarantee coverage for women-owned micro and small enterprises, increasing the coverage to 90% under its guidelines. This step is aimed at empowering women entrepreneurs and encouraging the growth of women-led businesses in the micro and small enterprise (MSE) sector.

---

About CGTMSE

• Launch and Purpose: The Credit Guarantee Scheme for Micro and Small Enterprises (MSEs) was launched by the Ministry of Micro, Small & Medium Enterprises (M/o MSME) in 2000.
  • The scheme was launched with the goal of improving access to credit for micro and small enterprises, particularly those that are unserved or underserved by traditional lending channels, such as banks.
• Objective:
  • The primary objective is to facilitate access to institutional credit for MSEs that do not have access to collateral or third-party guarantees, enabling them to secure financing for their operations or expansion.
• Operation and Implementation:
  • CGTMSE was jointly set up by the Government of India and the Small Industries Development Bank of India (SIDBI) to manage and implement the Credit Guarantee Scheme.
• Funding:
  • The corpus of CGTMSE is contributed by the Government of India and SIDBI in the ratio of 4:1.

---

Eligibility and Coverage

• Eligible Lending Institutions:
  • The scheme covers various scheduled commercial banks (Public, Private, Foreign Banks), select Regional Rural Banks, and NBFCs (Non-Banking Financial Companies).
  • Other eligible institutions include National Small Industries Corporation Ltd. (NSIC), SIDBI, and select Small Finance Banks.
• Eligible Credit Facility:
  • Collateral-free credit is offered to Micro & Small Enterprises (MSEs) for amounts up to Rs. 5 crore.
  • The guarantee coverage varies based on the loan amount, type of borrower, and region.

---

Credit Guarantee Coverage under CGTMSE

1. General Coverage:
   • For micro enterprises (loans up to Rs. 5 lakh), the guarantee coverage is 85%.
   • For loans ranging from Rs. 5 lakh to Rs. 5 crore, the coverage is 75%.
2. Special Provisions:
   • North East Region: Loans up to Rs. 50 lakh have 80% coverage; loans above Rs. 50 lakh are covered at 75%.
   • SC/ST Entrepreneurs, PwDs, and Aspirational Districts: These enterprises receive 85% guarantee coverage.
   • Women Entrepreneurs: For women-owned or women-operated MSEs, the guarantee coverage is increased to 90%.
3. Claim Settlement:
   • In case of default, the trust settles the claim up to 75% of the amount in default, with 85% or 80% for eligible categories.

---

Recent Changes for Women Entrepreneurs

• Under the new guidelines, the credit guarantee cover for women-owned micro and small enterprises has been enhanced to 90%. This measure is designed to further support the growth and sustainability of businesses led by women, which often face greater challenges in accessing financial support and credit.

---

Key Benefits of CGTMSE

• Collateral-Free Loans: MSEs can access financial support without providing collateral, thus enabling businesses, especially those without substantial assets, to secure funding.
• Increased Loan Availability: With the backing of a guarantee cover, lending institutions are more willing to provide loans to new entrepreneurs and those from disadvantaged groups.
• Support for Various Categories of Borrowers: The scheme offers varying levels of guarantee cover depending on factors such as business type (e.g., women-owned, SC/ST, PwDs) and geographic location (e.g., North East India).

---

Key Takeaways
The CGTMSE scheme plays a crucial role in fostering the growth of micro and small enterprises in India by providing them with easy access to collateral-free credit. The recent enhancement of the credit guarantee cover to 90% for women entrepreneurs underlines the government's commitment to promoting gender inclusivity in business. With its broad coverage and focus on underserved sectors, CGTMSE is expected to continue empowering small businesses across India, enabling them to thrive in an increasingly competitive market.

Mind Sprint