The central government is drafting a new credit guarantee scheme for export-oriented MSMEs, with the aim of finalising it within a month. This initiative focuses on providing collateral-free loans of up to Rs 20 crore per borrower, significantly boosting trade finance accessibility for small businesses. The scheme intends to offer substantial credit cover to mitigate risks associated with export activities.
Under the proposed framework, the scheme may guarantee up to 95% of loans for micro and small enterprises, offering robust support to the sector. Medium enterprises can expect a guarantee of up to 75% on their loans, ensuring a considerable level of risk mitigation. The guarantee fee for borrowers is projected to be around 1.5%, making the scheme affordable and accessible.
A senior official stated that the government aims to roll out the scheme by September. The scheme will remain active for six years, aligning with the 16th Finance Commission award cycle, which concludes at the end of fiscal year 2031. This long-term commitment provides stability and assurance to exporters, fostering a conducive environment for growth and expansion in international markets. The new credit cover should help to reduce reliance on export insurance in some cases.
This enhanced credit cover promises substantial benefits for exporters, particularly small businesses striving to expand their global footprint. By providing guarantees on loans, the scheme reduces the need for collateral, unlocking much-needed trade finance for MSMEs. This increased access to capital enables exporters to fulfil larger orders, invest in new technologies, and explore new markets, ultimately driving export growth and contributing to the nation’s economic prosperity.
Furthermore, the scheme’s risk mitigation aspect provides a safety net for exporters, shielding them from potential losses due to unforeseen circumstances in international trade. This security encourages businesses to take calculated risks and pursue ambitious export strategies, fostering innovation and competitiveness. The reduction in reliance on export insurance translates to lower operational costs for exporters, further enhancing their profitability and competitiveness in the global marketplace. The credit cover aims to create a more level playing field, enabling even the smallest exporters to compete effectively on the international stage.
The government is working diligently to ensure the scheme’s launch by September. This ambitious timeline reflects the urgency in addressing the trade finance needs of MSME exporters. Preparations are underway across various departments to streamline the approval process and ensure seamless implementation. The focus is on creating a user-friendly platform for small businesses to access the credit cover without unnecessary bureaucratic hurdles.
The proposed six-year operational period, extending until the end of FY31, provides exporters with a long-term perspective for their export strategies. This extended duration allows businesses to confidently invest in capacity building, market development, and innovation, knowing that the credit cover will be available to support their growth over the medium term. The government believes this stability will encourage exporters to explore new markets and forge lasting international partnerships, contributing to sustained export growth and economic diversification. This also provides ample time to assess the scheme’s effectiveness and make any necessary adjustments.
The September launch date is a key target, and stakeholders are working collaboratively to meet this deadline. This includes finalising the operational guidelines, setting up the necessary infrastructure, and conducting awareness campaigns to educate exporters about the benefits of the scheme. The government is committed to ensuring that all eligible MSME exporters can easily access and benefit from this vital credit cover, thereby boosting their competitiveness and contributing to the nation’s export success. The emphasis on risk mitigation and enhanced trade finance accessibility is expected to have a significant positive impact on the export sector.