Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
As its logo depicts a colorful flying bird, CGTMSE indeed gives wings to entrepreneurial zeal of millions of youths who are having bankable business ideas but lack collateral security or third-party guarantee to access credit from formal source.
CGTMSE extends them a helping hand by providing guarantee to enable them access credit leading to setting up viable micro and small enterprises. Thereby transforming them from job seekers to job providers. Availability of bank credit without the hassles of collaterals guarantees is a major source of support to the first-generation entrepreneurs.
Keeping this objective in view, Ministry of Micro, Small & Medium Enterprises (MSME), Government of India launched Credit Guarantee Scheme (CGS) so as to strengthen credit delivery system and facilitate flow of credit to the MSE sector. To operationalise the scheme, Government of India and SIDBI set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
So, CGTMSE was jointly set up in July 2000 by Ministry of Micro, Small & Medium Enterprises and SIDBI with an initial corpus of Rs 2,500 crore (out of that SIDBI’s contribution was Rs 500 crore) which was increased to Rs 7,500 crore with an additional Rs 5,000 crore contributed by the government of India. Later a further infusion of ₹9,000 crore was made (out of that SIDBI’s contribution was Rs 500 crore) to the corpus to enable revamping of Credit Guarantee Scheme.
CGTMSE has been playing an important role in facilitating flow of credit to MSE segment in the country. The purpose for which the Trust was formed, i.e. to strengthen credit delivery system and to facilitate flow of credit to the MSE sector, create access to finance for unserved, under-served, underprivileged and new generation entrepreneurs, is being pursued with renewed vigour and commitment.
India is poised to become an USD 5 Trillion economy and go beyond it soon. It will be possible because there is a substantial increase in the economic activity. To accomplish this herculean task industry requires an enormous amount of investment in domestic font. While the youth in India are ready with their innovations and risk-taking abilities to embark upon an entrepreneurial journey and become job creators, the country was fall short of immovable collateral securities to secure a credit facility.
In this context, CGTMSE, is here to ensure adequate and timely credit flow to SME sector. CGTMSE is a financial inclusion initiative that aims to support MSEs by providing credit guarantees to lenders, such as banks and financial institutions.
“We are strengthening the MSE ecosystem by enhancing access to collateral-free credit and reducing the credit risk for lenders”
Mr. Manish Sinha, Chief Executive Officer, CGTMSE, a senior officer of SIDBI, has been now at the helm of affairs and under his guidance and dedicated focus, CGTMSE is undergoing transformative reforms with leveraged technology to expand the scope of its schemes to uncovered segments. Leading a very enthusiastic team Mr. Sinha has many innovative ideas and working relentlessly to execute them. Indian Economy & Market reached out to him, to piece together the organisation’s objectives, achievements and new initiatives in detail.
How you feel about this year’s Budget announcements as the head of the CGTMSE? Do you think the finance minister has done justice with your demands/ expectations?
The Government has been consistently committed to strengthening credit access for MSMEs, and the recent Budget announcements are a testament to that. One of the most notable decisions—doubling the credit guarantee cover from ₹5 crore to ₹10 crore—is a significant step forward. This move is expected to unlock an additional ₹1.5 lakh crore in credit over the next five years, which will enable us to expand our outreach substantially. It is a welcome development that aligns well with our mission of empowering micro and small enterprises and supporting inclusive economic growth. Besides, the Budget announcements in respect of revised definition of MSMEs, enhancement in guarantee covers for exporters and start-ups are other major announcements which are expected to give a major boost the MSMEs.
To start with, please let our readers know how CGTMSE evolved over time.
Since its inception in 2000, the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) has continuously evolved to enhance financial inclusion and strengthen support for underserved segments, particularly women entrepreneurs.
I will take you through the chronology of events because that will give you how the process was gradually evolved.
Early Enhancements (2003–2009): Initial changes focused on improving accessibility and affordability, including increased credit coverage for women borrowers (from 70 per cent to 80 per cent) and the introduction of pro-rata and differential fee structures. In 2007, guarantee coverage for women was further enhanced up to 85 per cent for loans below ₹5 lakh. By 2009, annual guarantee fees were reduced significantly for women.
Broadening Inclusion (2012–2017): The removal of the ₹5 lakh minimum loan requirement in 2012 marked a pivotal step in expanding reach. The launch of risk-based pricing in 2017 incentivized performance among Member Lending Institutions (MLIs), promoting a more responsible lending ecosystem.
Strengthening Delivery (2016–2021): The CGS-II scheme for NBFCs was introduced in 2016, expanding the network of participating institutions. In 2021, reforms enabled standard loan guarantees to be obtained at any time and brought farmer producer organizations into the fold.
Focused Reforms (2022–2025): In recent years, CGTMSE has undertaken several progressive reforms to enhance credit access for MSEs. In 2022, the loan ceiling was raised from ₹2 crore to ₹5 crore, along with additional incentives for MSEs covered under government schemes. In 2023, the guarantee coverage for all women borrowers was standardized at 90 per cent, reinforcing CGTMSE’s gender-intentional approach. Most recently, in the Union Budget 2024–25, the credit guarantee ceiling was further enhanced to ₹10 crore, significantly expanding the scope and impact of collateral-free lending to the MSE sector.
How is the CGTMSE enabling environment for the MSE sector?
CGTMSE plays a pivotal role in strengthening the MSE ecosystem by reducing the credit risk for lenders and enhancing access to collateral-free credit for micro and small enterprises. Through continuous scheme enhancements—such as increased guarantee limits, reduced guarantee fees, inclusion of NBFCs and producer organizations, and performance-based pricing—it incentivizes lending and de-risks financing for underserved segments. By supporting both lenders and borrowers, CGTMSE fosters a more inclusive, responsive, and sustainable credit environment that enables MSEs to grow, formalize, and contribute to economic development.
How CGTMSE supports the first-generation entrepreneurs to realise their dream of setting up a unit of their own Micro and Small Enterprise?
CGTMSE empowers first-generation entrepreneurs by removing one of the biggest barriers to credit—the need for collateral. Many aspiring entrepreneurs lack assets to offer as security, making it difficult to access formal finance. CGTMSE bridges this gap by providing credit guarantee cover to banks and financial institutions for loans up to ₹5 crore, enabling them to lend without collateral. Additionally, reduced guarantee fees and higher coverage for women and underserved segments further encourage lending. This support system helps entrepreneurs confidently start and sustain their enterprises, fostering self-reliance and job creation.
Can you explain in detail how “Hybrid Security” product functions?
The Hybrid Security product under CGTMSE supports borrowers who can offer partial collateral. In such cases, the loan is secured partly by the borrower’s asset and partly by CGTMSE’s guarantee. The unsecured portion is covered as per CGTMSE norms, with guarantee coverage ranging from 75 per cent to 85 per cent, depending on borrower category. This product enables lenders to extend credit while reducing their risk and helps borrowers access finance even without full collateral. It is especially beneficial for first-generation and small entrepreneurs seeking to establish or grow their enterprises.
Any other innovative schemes you have introduced recently?
Yes, CGTMSE recently introduced a Special Provision for Informal Micro Enterprises (IME). This initiative supports GST-exempt enterprises registered on the Udyam Assist Platform. It offers collateral-free credit up to ₹20 lakh, with 85 per cent guarantee coverage, and does not require creation of primary security or initiation of legal action for claims. The Annual Guarantee Fee is attractively low—0.37 per cent for loans up to ₹10 lakh and 0.45 per cent up to ₹20 lakh—making it a highly accessible and inclusive scheme for informal micro businesses.
How is your relationship with MLIs?
Our relationship with Member Lending Institutions (MLIs) is built on strong collaboration and mutual commitment to supporting the micro and small enterprise sector. We work closely with over 276 MLIs—including public and private sector banks, NBFCs, and RRBs—through regular consultations, capacity-building workshops, and process improvements. CGTMSE continuously incorporates MLI feedback to enhance scheme effectiveness, simplify processes, and improve claim settlements. This partnership-driven approach has been instrumental in expanding the reach of credit guarantee coverage and deepening financial inclusion across the country.
What is your source of revenue?
CGTMSE’s primary source of revenue is the Annual Guarantee Fee (AGF) collected from Member Lending Institutions (MLIs) for the credit guarantees provided under the scheme. The AGF is charged as a small percentage of the guaranteed amount and varies based on loan size, borrower profile (e.g., women, Northeast, ZED-certified), and product type. This fee supports the sustainability of the Trust by funding guarantee obligations and administrative costs. Additionally, CGTMSE receives initial corpus contributions from the Government of India and SIDBI, which help anchor the fund.
You had been also approaching State governments. What is the development on this front?
Yes, we have been actively engaging with several State Governments to establish state-level collaborations, with a focus on offering up to 100 per cent guarantee coverage. We are pleased to share that partnerships have already been formalized with 10 states, and discussions are ongoing with many others. These collaborations aim to enhance credit access, support the unique needs of local MSMEs, and design co-guarantee schemes tailored to promote regional industries and drive inclusive economic growth at the grassroots level.
Which types of borrowers are covered under your Schemes?
CGTMSE provides credit guarantee coverage to a wide range of borrowers, with differentiated support based on their profile and location:
- 90 per cent coverage for women entrepreneurs and MSEs promoted by Agniveers. 85 per cent coverage for MSEs with loans up to ₹5 lakh, SC/ST entrepreneurs, MSEs in Aspirational Districts, ZED-certified units, and persons with disabilities (PwDs)
- 80 per cent coverage for MSEs located in the North East Region, and UTs of Jammu & Kashmir and Ladakh (for loans up to ₹50 lakh).
- 75 per cent coverage for all other categories of borrowers.
This inclusive approach ensures targeted support for priority segments.
Is guarantee benefit available to existing units of a lending institution which has become a MLI of CGTMSE?
CGTMSE provides credit guarantee up to ₹10 crore for credit extended by its Member Lending Institution to new as well as existing Micro and Small Enterprises (MSEs) without collateral security and third-party guarantee for the activities mentioned in the MSMED Act, 2006. MLIs can apply for guarantee cover anytime during the loan tenure for closed / expired cases also, provided the credit facility was not restructured or in SMA2 status in the last year from the application date.
How you are contributing to Atmanirbhar Bharat?
CGTMSE plays a vital role in advancing the vision of Atmanirbhar Bharat by empowering micro and small enterprises through collateral-free credit access, especially for first-generation entrepreneurs, women, and underserved regions. By reducing credit risk for lenders, we enable increased flow of institutional credit to the grassroots. Initiatives like enhanced guarantee coverage for priority segments, support for Informal Micro Enterprises (IMEs), and collaboration with state governments are helping promote local entrepreneurship, self-employment, and job creation—key pillars of a self-reliant and resilient Indian economy.
