With inputs from Inputs from the Ministry of MSME, Govt. of India
New Delhi, Jan 16, 2011 (Washington Bangla Radio / PIB India) The Government launched the Credit Guarantee Fund Scheme for Micro and Small Enterprises in August, 2000 with the objective of making available credit to Micro and Small Enterprises (MSEs) for loans up to Rs. 100 lakh without collateral/third party guarantees. First generation entrepreneurs in MSE sector find it difficult to access credit from the organized banking sector. The banks on their part are concerned about the likely defaults in small loans and hence try to collateralize their exposure to the small borrowers. Keeping this in mind, it was thought fit to create the instrument of Credit Guarantee to enhance the comfort level of the banks for financing loans, as well as a new gateway for MSE entrepreneurs to get funding without collateral security and/or third party guarantee. The scheme is being operated by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) set up jointly by the Government and SIDBI.
The scheme covers collateral free credit facility (term loan and/ or working capital) extended by eligible lending institutions to new and existing micro and small enterprises up to Rs. 100 lakh per borrowing unit. The guarantee cover provided is up to 75% of the credit facility up to Rs.50 lakh with an incremental guarantee of 50% of the credit facility above Rs.50 lakh and up to Rs.100 lakh (85% for loans up to Rs. 5 lakh provided to micro enterprises, 80% for MSEs owned/ operated by women and all loans to NER). One time guarantee fee of 1.5% of the credit facility sanctioned (0.75% for NER including Sikkim) and Annual Service Fee of 0.75% is collected from Member Lending Institutions (MLIs). The corpus of CGTMSE is contributed by the Government and SIDBI in the ratio of 4:1. At present the corpus is around Rs.3300 crore which enables substantial enhancement in the credit flow to MSEs by leveraging it many times over.
A total of 125 Member Lending Institutions comprising of 26 Public Sector banks, 18 Private Sector Banks, 68 Regional Rural Banks (RRBs), 4 foreign banks and 9 other Financial Institutions have been registered which allows a wide coverage across country.. CGTMSE has been recognised internationally and has been made a member of the Asian Credit Supplementation Institutions Confederation (ACSIC), which promotes sound development of the credit supplementation system for Micro and Small Enterprises in the countries of Asia through exchange of information, discussions and interchange of personnel among credit supplementation institutions. CGTMSE was chosen to host the 24th ACSIC Conference, a annual conference for Heads of Guarantee Organisations of Asian region for the first time in India during October-November, 2011.
The scheme has helped around 7 lakh entrepreneurs by providing guarantee & enabling them loans worth more than Rs. 31 thousand crore. Success stories abound, from a small taxi driver to steel equipment manufacturer. Some of these stories are narrated below.
Driving Life, Collateral Free