Credit Guarantee Fund Scheme: elevating the entrepreneurial ecosystem in India

Credit Guarantee Fund Scheme: elevating the entrepreneurial ecosystem in India

Puja Bhardwaj | StartupCity Magazine

CreditGuarantee Funds Trust for Micro and Small Enterprises is one of the majorschemes inaugurated by the Indian government to elevate the entrepreneurialecosystem in India. It is was started in August 2000 by the Ministry of Medium,Small and Micro Enterprises (MSME) in cooperation with the Small IndustriesDevelopment Bank of India (SIDBI). By this program, the ministry offerscollateral-free credit to the micro and small enterprise sector. For theimplementation of the program, the Ministry of Micro, Small and MediumEnterprises, GOI and SIDBI established a Trust called CGTMSE for Micro andSmall Enterprises.

CGTMSEprovides a guarantee to the financial institutions up to a certain limit forall dealings done by them to the medium, small, and micro sectors. Thisinitiative enables banks and other lending institutions to grant funds toraising entrepreneurs without demanding for security or third-party guarantees.CGTMSE is one of the effective provisions that support small Indian businessmento flourish in a competing environment. As the uncertainty of granting a bankloan without any collateral is a fundamental factor for all banks; the purposeof CGTMSE is to encourage these institutions to achieve their lending goals tothe MSME market without any upsets.

Extent of CGTMSE

The scope ofCGTMSE is up to 80% for –

1. All Microand small enterprise which is administered and regulated by femaleentrepreneurs.

2. All creditsare provided to the North-eastern states of India including Sikkim.

Eligibility Criteria

Existing andthe new enterprises both are eligible to be covered under the schemes who areinvolved in the process of:

•    Manufacturing activity

•    Service activity

•    It is now available for selected NBFC'salso

Objective of the Scheme

The centralaim of the scheme is to transform the dreams of entrepreneurs for setting uptheir own business into actuality. It directs on establishing a solid creditrelief system that will encourage a better credit flow to the MSME sector.

How to avail the loan under this scheme?

The entireprocedure to opt loan for this scheme is presented below:

• Firstof all, create a Business Plan including the complete details of your business.Your blueprint should be such that it defines out the viability of the project.
• Now,decide which lender bank to approach for the loan and submit the applicationand your business model there.
• Thebank will go through your application and business model and validate alldetails.
• Afteraffirmation, the bank will forward the application to the CGFTMSE Fund wherethe application will be viewed again. If it is accepted the CGFTMSE will commandthe bank to release fund for the business.