New Delhi: Around 36 lakh borrowers are expected to benefit from the government’s microfinance credit guarantee scheme CGSMFI 2.0, aimed at boosting lending to small borrowers and strengthening financial inclusion in India.

The Credit Guarantee Scheme for Microfinance Institutions (CGSMFI 2.0) will provide guarantee cover to banks and financial institutions via the National Credit Guarantee Trustee Company Limited, reducing risks linked to loans extended to NBFC-MFIs and microfinance institutions (MFIs).

CGSMFI 2.0 to boost microfinance lending in India

Under the scheme, the government seeks to enable a credit flow of up to ₹20,000 crore to the microfinance sector in India, encouraging banks to increase funding to NBFC-MFIs for onward lending to small borrowers.

The initiative is designed to address current stress in the sector, where reduced bank lending has impacted the ability of smaller MFIs to access funds.

Key features of the microfinance credit guarantee scheme

The scheme provides credit guarantee cover based on the size of the lending institution:

  • 80 per cent coverage for small NBFC-MFIs/MFIs
  • 75 per cent coverage for medium institutions
  • 70 per cent coverage for large institutions

Eligible beneficiaries include both existing and new borrowers who fall under the microfinance definition prescribed by the Reserve Bank of India.

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Strengthening financial inclusion and small borrower access

The microfinance credit guarantee scheme in India is expected to play a critical role in expanding access to credit for low-income households and underserved communities.

Microfinance institutions act as key intermediaries in delivering small-ticket loans to individuals at the bottom of the economic pyramid, supporting livelihoods, small businesses and rural development.

“The scheme will encourage lending institutions to support NBFC-MFIs and MFIs, thereby ensuring better credit access for small borrowers,” the government said in a statement.

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Scheme validity and outlook

The CGSMFI 2.0 scheme will remain in force until June 30, 2026, or until guarantees covering ₹20,000 crore are issued, whichever is earlier.

With policy support and risk-sharing mechanisms in place, the government expects improved liquidity in the microfinance ecosystem and a revival in microfinance lending growth in India.

IANS