Agency:

The NITI Aayog serves as the apex public policy think tank of the Government of India, providing both directional and policy inputs. NITI Aayog acts as the quintessential platform of the Government of India to bring states to act together in the national interest, and thereby fosters cooperative federalism.

Context:

The Credit Guarantee Fund for Micro Units (CGFMU) scheme was set up by the Govt of India in 2015 with an initial corpus of INR 30 bn. (USD 367 mn.) CGFMU is operated by National Credit Guarantee Trustee Company Limited (NCGTC) which is wholly owned by the Government of India and is the trustee of the fund. The main objective of the guarantee fund is to provide an incentive to Banks/NBFCs/MFIs/other financial intermediaries, who are Member Lending Institutions (MLI) to increase access and availability of microloans.

Objective:

The objective of the study was to make recommendations on the enhancement of the credit guarantee eco-system in India to foster an adequate flow of funds to the MSME sector.

Intervention:

FinValue was responsible for leading a team to conduct secondary research to study the performance of the scheme, its strengths and weakness, the evolution of credit guarantee mechanisms in India along with research on international success examples and best practices.

The study also involved primary research (approx.. 150 interviews) with about 30 public and private sector banks/co-operative banks/small finance banks etc. from across seven states of India as well as with 30+ stakeholders from among policymakers, regulators, credit guarantee institutions, MSME development bank, industry experts, industry associations, and thought leaders.

Outcome:

The recommendations are expected to help the ministry of Finance redesign and refine the credit guarantee scheme.