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Credit Guarantee Fund Scheme: elevating the entrepreneurial ecosystem in India


Credit Guarantee Fund Scheme: elevating the entrepreneurial ecosystem in India

Puja Bhardwaj | StartupCity Magazine

Credit Guarantee Funds Trust for Micro and Small Enterprises is one of the major schemes inaugurated by the Indian government to elevate the entrepreneurial ecosystem in India. It is was started in August 2000 by the Ministry of Medium, Small and Micro Enterprises (MSME) in cooperation with the Small Industries Development Bank of India (SIDBI). By this program, the ministry offers collateral-free credit to the micro and small enterprise sector. For the implementation of the program, the Ministry of Micro, Small and Medium Enterprises, GOI and SIDBI established a Trust called CGTMSE for Micro and Small Enterprises.

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

Extent of CGTMSE

The scope of CGTMSE is up to 80% for –

1. All Micro and small enterprise which is administered and regulated by female entrepreneurs.

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

Eligibility Criteria

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

•    Manufacturing activity

•    Service activity

•    It is now available for selected NBFC’s also

Objective of the Scheme

The central aim of the scheme is to transform the dreams of entrepreneurs for setting up their own business into actuality. It directs on establishing a solid credit relief system that will encourage a better credit flow to the MSME sector.

How to avail the loan under this scheme?

The entire procedure to opt loan for this scheme is presented below:

  • First of 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 application and your business model there.
  • The bank will go through your application and business model and validate all details.
  • After affirmation, the bank will forward the application to the CGFTMSE Fund where the application will be viewed again. If it is accepted the CGFTMSE will command the bank to release fund for the business.
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