New Delhi is set to empower 36 lakh micro-borrowers through the revamped Credit Guarantee Scheme for Microfinance Institutions 2.0, as revealed by the government on Saturday. This strategic move comes amid challenges in the microfinance sector, where banks have curtailed lending due to rising financial pressures.
At its core, CGTMFI 2.0 offers robust guarantee protection to banks and financial entities lending to NBFC-MFIs. Backed by the National Credit Guarantee Trustee Company, the scheme safeguards against defaults, aiming to unlock Rs 20,000 crore in fresh credit. This influx will enable MFIs to extend loans to underserved communities.
Coverage is tailored: small institutions get 80% guarantee, medium ones 75%, and large ones 70%. Compliant with RBI guidelines, it encompasses loans to both fresh and ongoing borrowers, broadening its impact.
The microfinance sector is indispensable for financial inclusion, channeling funds to low-income groups excluded from formal credit systems. Recent sector-wide stresses prompted banks to pull back, hampering small MFIs’ ability to serve clients. This scheme reverses that trend by motivating lenders to ramp up funding.
Running through June 2026 or until the guarantee cap is reached, the initiative promises a surge in credit access. It not only alleviates immediate pressures but also lays the foundation for sustainable growth in microfinance, fostering economic upliftment for millions.