Govt pushes stronger credit guarantee framework to boost MSME lending

The government has reiterated the need to strengthen credit guarantee frameworks to improve access to formal finance for micro and small enterprises (MSEs), as policymakers flagged persistent collateral constraints in the sector.

Speaking at a global symposium on credit guarantees hosted by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Dr Rajneesh, additional secretary and development commissioner in the ministry of MSME, said such frameworks are critical in “addressing the persistent challenge of collateral constraints and enabling broader access to formal finance.”

The two-day event, held in Mumbai, brought together participants from over 19 countries and 26 organisations, including policymakers, financial institutions and credit guarantee agencies, highlighting the growing global focus on strengthening credit access systems.

Focus on easing credit access for MSMEs

Officials said limited access to collateral remains a key barrier to formal credit for micro and small enterprises, restricting their ability to scale and participate fully in the formal economy.

Credit guarantee mechanisms, which allow lenders to extend loans without requiring traditional collateral, are increasingly being seen as a key policy tool to expand financial inclusion.

Manoj Mittal, Chairman, CGTMSE and CMD of SIDBI, spoke about the importance of such frameworks, noting their role in catalysing credit flow to underserved segments.

CGTMSE, which provides guarantees of up to ₹10 crore per borrower, said it will continue to support collateral-free lending and expand access to institutional finance for smaller enterprises.

Global collaboration and evolving frameworks

The symposium also stressed the need for stronger global cooperation in designing effective credit guarantee systems, particularly in the face of evolving financial risks and economic uncertainties.

Manish Sinha, CEO, CGTMSE, said the platform was aimed at fostering “global dialogue, innovation and collaboration” in strengthening credit guarantee frameworks.

Discussions covered key themes such as risk management, sustainability, ESG integration and support for women-led and underserved entrepreneurs, reflecting a shift toward more inclusive and resilient financial systems.

Shift toward digital and AI-led credit models

Participants also highlighted the growing role of technology in credit delivery, including the use of data-driven and AI-enabled models to improve risk assessment and expand lending access.

These emerging models are expected to complement traditional guarantee structures, making credit systems more efficient and scalable.

The discussions concluded with a broader consensus on the need to strengthen institutional frameworks and align credit guarantee systems with evolving policy priorities.

CGTMSE said it remains focused on enabling collateral-free credit at scale, while supporting inclusive entrepreneurship and aligning with national efforts to deepen financial inclusion.