Why in news?
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) recently hosted an international symposium in Mumbai to mark its silver jubilee. Officials from 19 countries discussed how credit‑guarantee schemes can help micro and small enterprises access loans without collateral.
Background
CGTMSE was set up in 2000 by the Small Industries Development Bank of India (SIDBI) and the Ministry of Micro, Small and Medium Enterprises. It offers credit guarantees that allow banks to lend to small businesses that lack collateral. In April 2023 the guarantee limit under its main scheme was increased from ₹2 crore to ₹5 crore to meet the growing credit needs of enterprises.
How does CGTMSE work?
- Guarantee coverage: When a bank lends to a micro or small enterprise, CGTMSE guarantees a significant portion of the loan (up to 75–80%) if the borrower defaults. This reduces the lender’s risk and encourages lending.
- Inclusive focus: The scheme targets first‑generation entrepreneurs, women‑led enterprises and underserved segments who often lack collateral. It supports loans for manufacturing, services and trading activities.
- Process: Participating banks and non‑bank finance companies register eligible loans under CGTMSE. In case of default, the trust settles the claim as per agreed terms.
Highlights from the symposium
- Delegates from Asia, Africa and Latin America shared experiences in implementing credit guarantees. Many emphasised digital platforms and risk‑based pricing to extend credit to micro enterprises.
- Indian officials highlighted CGTMSE’s role in supporting women entrepreneurs and its new digital portal, which allows real‑time monitoring and claim processing.
- The event underscored the importance of credit guarantees in boosting formal credit access and promoting inclusive economic growth.
Source: PIB