Meghalaya Credit Guarantee Scheme (MCGS) to be launched from November 1, next

Syllad | The Rising MeghalayaOctober 29, 2022

In order to address the challenges faced by the banks in aggressively extending credit to the MSE borrowers, the Meghalaya Finance Department has signed an MoU with Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) under the Ministry of MSME, Govt of India on Friday to implement the “Meghalaya Credit Guarantee Scheme (MCGS)”. 

The MOU will strengthen the credit delivery system and facilitate flow of credit to the MSE sector. Currently, the loans taken by MSME borrowers are covered under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) against a risk coverage of 75% of the loan amount under various MSME schemes. However, banks still perceive their portion of risk at 25% as high. This is one of the deterrents for the banks to extend credit to the MSME borrowers.

To overcome this major challenge, the Govt of Meghalaya is collaborating with CGTSME by increasing the coverage guarantee upto a maximum of 95% by launching the Meghalaya Credit Guarantee Scheme (MCGS). This will minimize the risk and encourage collateral free lending by the member Lending Institutions.

Through this mechanism, the State Government is leveraging on the existing CGTMSE scheme of Government of India. With a contribution of Rs 5 crore, a portfolio of Rs 250 crore would be created. Considering average loan size of  Rs 1 lakh, more than 25,000 units would be supported through this State Government intervention. In addition, considering 3 employees per unit, 75,000 employment opportunities would be generated under the MSE sector in the State.

The MCGS will commence tentatively from 1st November next and continue till the portfolio reaches a level commensurate with contribution of State Government. The total corpus commitment towards the proposed MCGS will be increased taking into account the initial performance of the scheme with the corpus of INR 5 crore.

Chief Minister Conrad K Sangma who was also present during the signing of the MoU emphasized that such interventions by the State Government is part of the overall objective of encouraging and  promoting entrepreneurship in the State.