The Credit Guarantee Fund scheme is a government-backed initiative designed to encourage banks and financial institutions to lend to micro and small enterprises (MSEs) without demanding collateral security. The primary aim is to facilitate easy credit flow to deserving entrepreneurs, startups, and small businesses, fostering economic growth and employment generation.
Managed by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), this fund acts as a risk mitigator, assuring lenders of loan repayment in case of borrower default. This removes the hurdle of collateral security that often restricts MSMEs from accessing institutional credit.
The CGTMSE scheme not only supports micro and small enterprises but also extends to education loans, skill development, and startup financing, thus contributing to holistic economic development. The scheme currently operates through four key credit guarantee schemes tailored for banks, NBFCs, PM SVANidhi beneficiaries, and co-lending partners. By offering a guarantee cover, the CGTMSE enhances credit availability, especially for micro and small enterprises, startups, and other segments that struggle with credit access due to lack of collateral or credit history.