In order to address the challenges faced by the banks in aggressively extending credit to micro and small enterprises in the State, the Finance Department, Government of Meghalaya has signed an agreement with Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) under the Union Ministry of MSME today.
Under the agreement, the Meghalaya Credit Guarantee Scheme (MCGS) will be implemented from next month in order to strengthen the credit delivery system and facilitate flow of credit to the micro and small enterprise sector.
Currently, the loans taken by micro and small enterprise borrowers are covered under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) against a risk coverage of 75 per cent of the loan amount under various MSME schemes.
However, banks still perceive their portion of risk at 25 per cent as high. This is one of the deterrents for the banks to extend credit to the micro and small enterprise borrowers.
To overcome this major challenge, the Meghalaya government is collaborating with CGTSME by increasing the coverage guarantee up to a maximum of 95 per cent by launching the Meghalaya Credit Guarantee Scheme (MCGS). This will minimise 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 three employees per unit, 75,000 employment opportunities would be generated under the micro and small enterprise sector in the State.
The MCGS will commence tentatively from November 1 and continue till the portfolio reaches a level commensurate with contribution of the 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 Rs 5 crore.
Chief Minister Conrad Sangma who was also present during the signing of the agreement emphasised that such interventions by the State government is part of the overall objective of encouraging and promoting entrepreneurship in the State.
