Shillong, Oct 29 (KNN) To help the flow of credit to MSME borrowers the State government of Meghalaya has joined hands with the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGFTMSE).

On Friday a MoU was signed between the state Finance department and the CGTMSE under the Ministry of MSME.

The pact will boost the credit delivery system and facilitate flow of credit to the MSE sector.

Conrad Sangma, Meghalaya Chief Minister highlighted on such interventions while speaking at the event. 

It is a part of the overall objective of encouraging and promoting entrepreneurship in the state, he added.

Currently, the loans taken by MSME borrowers are covered under 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 MSME borrowers.

To overcome this major challenge, the launching the MCGS increases the coverage guarantee up to a maximum of 95 per cent and will minimize the risk and encourage collateral free lending by the member lending institutions, the statement said.

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 November 1 this year and will 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.  (KNN Bureau)