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CGTMSE aims to ensure collateral-free credit for MSEs: Manish Sinha
Articles- May 27,25
In this interview with Rakesh Rao, Manish Sinha, CEO, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), explains how CGTMSE is proactively working on facilitating finance and capacity-building for micro and small enterprises.
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) was formed with the intention of helping micro and small enterprises (MSEs) by providing guarantee to enable them access credit leading to setting up viable businesses. In an uncertain, volatile global market, access to finance is crucial for the survival of these businesses. In this interview with Rakesh Rao, Manish Sinha, CEO, Credit Guarantee Fund Trust for Micro and Small Enterprises, explains how CGTMSE is proactively working on facilitating finance and capacity-building for micro and small enterprises in the manufacturing sector.
How is Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) assisting the growth of Indian industries?
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) was established in the year 2000 as a collaborative initiative between the Ministry of Micro, Small and Medium Enterprises (MSME), Government of India, and the Small Industries Development Bank of India (SIDBI). The primary objective of CGTMSE is to facilitate collateral-free credit to Micro and Small Enterprises (MSEs), thereby fostering entrepreneurship and financial inclusion.
CGTMSE offers credit guarantee coverage for loans up to Rs10 crore. This allows lenders to extend credit to eligible MSEs without requiring collateral security or third-party guarantees, which are often barriers for small businesses. By mitigating credit risk for lending institutions, CGTMSE encourages wider access to institutional credit for MSEs.
The scheme has been instrumental in promoting first-generation entrepreneurs, women-led enterprises, and those from underserved and underrepresented segments. In doing so, CGTMSE has significantly contributed to strengthening India’s entrepreneurial ecosystem and enhancing the reach of formal financial services to grassroots businesses.
What are the key challenges faced by micro and small enterprises? How is CGTMSE boosting credit access for MSEs and assisting their growth?
Micro and small enterprises face a host of challenges when it comes to accessing formal credit. These challenges include:
- The lack of collateral, which prevents many enterprises from qualifying for loans from financial institutions.
- Limited credit history and inadequate financial documentation, which make it difficult for lenders to assess their creditworthiness.
- A high perceived risk by lenders, often leading to reluctance in extending credit to small businesses.
- Delays in payments and inefficient working capital cycles that strain liquidity.
- Low awareness among MSEs about available financial products and schemes tailored to their needs.
CGTMSE addresses these challenges by offering collateral-free credit guarantee coverage to lending institutions for loans extended to eligible MSEs. The guarantee coverage ranges from 75 per cent to 90 per cent, depending on the profile of the borrower and the nature of the enterprise. This significantly reduces the risk for lenders, making them more willing to support MSEs.
In addition, CGTMSE has developed tailored schemes to support women entrepreneurs, Scheduled Caste/Scheduled Tribe entrepreneurs, MSEs operating in aspirational districts, and informal micro enterprises. These targeted interventions have been instrumental in enhancing financial inclusion, ensuring timely credit access, and enabling MSEs to scale operations and contribute to India’s economic development.
The government has announced a few initiatives/schemes for meeting financial requirements of MSEs. How is CGTMSE playing an active role in implementing these initiatives?
CGTMSE plays a critical role in implementing several flagship initiatives of the Government of India that are focused on improving credit access for Micro and Small Enterprises (MSEs).
The Special Provision for Informal Micro Enterprises (IME), launched recently, which is aligned with the Udyam Assist Platform. This initiative is designed to formalise and finance GST-exempt informal businesses, providing them with a pathway into the formal financial ecosystem.
CGTMSE forms strategic partnerships with various State Governments to implement co-guarantee models. Under these partnerships, CGTMSE offers guarantee coverage ranging from 90 per cent to 100 per cent for eligible enterprises operating within those states.
We work towards integration of schemes like PMEGP (Prime Minister’s Employment Generation Programme), SVANidhi, and PM Vishwakarma Yojana, through which collateral-free guarantees are extended to promote self-employment, micro-entrepreneurship, and traditional skills-based livelihoods.
These efforts ensure effective last-mile credit delivery, especially to the most vulnerable and underserved segments of the entrepreneurial landscape. CGTMSE thus acts as a backbone to India’s efforts in strengthening the MSE ecosystem and enabling inclusive growth.
With the new classification of MSMEs coming into effect from April 1, 2025, what impact do you foresee on the funding opportunities for MSEs?
The revised classification of MSMEs is expected to significantly enhance funding opportunities for micro and small enterprises by introducing more clarity and flexibility in defining enterprise size based on investment and turnover thresholds.
This change is likely to:
- Expand the base of enterprises eligible under various credit-linked schemes, including those supported by CGTMSE.
- Facilitate graduated and uninterrupted access to finance, thereby enabling enterprises to grow without the fear of losing MSME benefits as they scale up.
- Encourage formalisation, better record-keeping, and improved financial documentation, which in turn make enterprises more bankable and creditworthy.
CGTMSE is currently aligning its operational frameworks and guarantee mechanisms to accommodate the revised classification norms. The Trust is committed to ensuring that more enterprises can benefit from collateral-free, timely credit under the new definition and continue contributing to the growth of the Indian economy.
Will the new tariff war that is now raging on in the world have any impact on Indian MSEs? If yes, could you please elaborate more?
Yes, the ongoing global tariff war poses several challenges for Indian MSEs, particularly those involved in international trade—either as exporters or importers of raw materials and components. The potential impacts of such geopolitical tensions include:
- A rise in input costs due to increased tariffs on imported machinery, raw materials, and intermediate goods, which can directly affect profitability.
- A reduction in the competitiveness of Indian exports if other countries impose retaliatory tariffs, making Indian products costlier in global markets.
- Disruption in global supply chains, which could delay production cycles and strain delivery schedules.
- Increased uncertainty and volatility in demand in international markets, which may affect cash flows and financial planning for MSEs.
To counter these risks, MSEs will need to build financial resilience, diversify their markets, and explore domestic alternatives for sourcing and production. CGTMSE plays a pivotal role in this context by ensuring that MSEs continue to have access to collateral-free credit. This helps them invest in upgrading operations, adapting to market shifts, and expanding into new territories.
Are there any new or upcoming initiatives of CGTMSE aimed at facilitating finance or capacity-building for MSEs, especially in the manufacturing sector?
Yes, CGTMSE is proactively working on several forward-looking initiatives to meet the evolving needs of MSEs, with a special focus on the manufacturing sector. This sector is vital for India’s GDP growth and employment generation.
Some of the key initiatives include:
- Enhanced guarantee coverage for manufacturing MSEs, including special incentives for women-led enterprises and units certified under the ZED (Zero Defect Zero Effect) scheme. These provisions are aimed at promoting high-quality, sustainable manufacturing practices.
- Dedicated guarantee schemes to formalise informal micro enterprises, facilitated through platforms like the Udyam Assist Platform, which helps bring GST-exempt businesses into the formal economy.
- Collaborations with State Governments to design and implement sector-specific co-guarantee models, tailored to the needs of regional manufacturing clusters and niche industries.
- Ongoing efforts to explore capacity-building partnerships that focus on enhancing credit readiness, improving financial literacy, and strengthening regulatory compliance among manufacturing enterprises.
These initiatives are aligned with CGTMSE’s vision to not only support financial inclusion but also to build long-term resilience and competitiveness within the Indian manufacturing ecosystem.
MSME finance
Collateral-free credit for micro & small enterprises
CGTMSE
Manish Sinha
Rakesh Rao
Credit Guarantee Fund Trust for Micro and Small Enterprises
manufacturing sector
MSME Ministry
Small Industries Development Bank of India
SIDBI
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