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36 Lakh Borrowers to Gain from Govt's Microfinance Credit Guarantee Scheme

The government has launched the Credit Guarantee Scheme for Microfinance Institutions-2.0, which is estimated to benefit approximately 36 lakh small borrowers. The scheme provides a 70% to 80% guarantee cover to banks and financial institutions to encourage lending to NBFC-MFIs and MFIs, facilitating a credit flow of up to Rs 20,000 crore. It aims to address the ongoing financial stress and slowdown in bank lending to the microfinance sector, particularly helping smaller MFIs secure loans. The scheme is valid until June 30, 2026, or until the guaranteed amount is exhausted.

Key Points: Govt's Microfinance Credit Guarantee Scheme to Aid 36 Lakh Borrowers

  • 36 lakh borrowers estimated to benefit
  • Rs 20,000 crore credit flow facilitated
  • 70-80% guarantee cover for lenders
  • Scheme valid till June 2026
  • Aims to ease stress in microfinance sector
2 min read

36 lakh borrowers estimated to benefit from govt's microfinance credit guarantee scheme

New scheme to provide Rs 20,000 crore credit flow to NBFC-MFIs, offering 70-80% guarantee cover to boost lending to small borrowers.

"NBFC-MFIs and MFIs are the key participants in the microfinance lending business. - Official Statement"

New Delhi, March 21

Approximately 36 lakh borrowers are estimated to benefit from the Credit Guarantee Scheme for Microfinance Institutions-2.0, the government said on Saturday.

The scheme aims to provide guarantee cover to banks/FIs through National Credit Guarantee Trustee Company Limited (NCGTC) against expected losses on the financial assistance extended by them to Non-Banking Financial Company-Microfinance Institutions (NBFC-MFIs) and MFIs for on lending to small borrowers.

The scheme aims to provide credit guarantee support through NCGTC to strengthen lending to MFIs, facilitates increased credit flow of up to Rs 20,000 crore to the NBFC- MFIs.

According to the salient features of the scheme, existing or new small borrowers within the regulatory definition of micro finance as prescribed by the RBI from time to time.

Guarantee coverage means 80 per cent of amount in default for small, 75 per cent for medium and 70 per cent for large NBFC-MFIs/ MFIs.

The scheme will facilitate increased credit flow to the MFI sector.

Microfinance plays a key role in financial inclusion by delivering credit to people at the bottom of the economic pyramid.

"NBFC-MFIs and MFIs are the key participants in the microfinance lending business. In view of ongoing financial stress in the microfinance sector, there has been a slowdown in lending by banks to MFIs due to which smaller MFIs are struggling to get loans," said the official statement.

The scheme aims to encourage lending institutions to provide funding to NBFC-MFIs or MFIs for on lending to small borrowers within the regulatory definition of micro finance as prescribed by the Reserve Bank of India.

The scheme is valid till June 30, 2026 or loans till Rs 20,000 crores are guaranteed, whichever is earlier, the statement added.

- IANS

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Reader Comments

R
Rohit P
Good initiative on paper. 36 lakh borrowers is a big number. But the real challenge is implementation. We've seen schemes before where the money gets stuck with middlemen. The government must ensure strict monitoring so that the actual small borrower, like a street vendor or a tailor, gets the funds.
A
Aman W
The 80% guarantee for small MFIs is a smart move. It reduces the risk for banks to lend to them. This can unlock credit in semi-urban and rural areas where banking penetration is still low. Financial inclusion is key for development.
S
Sarah B
Working with an NGO, I've seen how microfinance can change lives, especially for women's self-help groups. A scheme like this that supports the lenders (MFIs) is crucial for sustainability. Hope it simplifies the process and reduces the paperwork burden for small borrowers.
K
Karthik V
While the intent is good, I have a concern. We must ensure that MFIs don't use this as a license for reckless lending and then rely on the government guarantee. There should be equal focus on financial literacy so borrowers don't get trapped in debt cycles. The scheme's success depends on responsible lending.
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Nisha Z
₹20,000 crore is a significant amount. If channeled properly, this can boost small businesses across India - from papad makers in Gujarat to handloom weavers in Varanasi. Jai Hind! 🇮🇳 Let's hope for a smooth rollout.

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