New Delhi, March 21 (AHN) Approximately 36 lakh borrowers are estimated to benefit from the Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0), the government said on Saturday.

The scheme aims to provide guarantee cover to banks/FIs through National Credit Guarantee Trustee Company Limited (NCGTC) against expected losses on the financial assistance extended by them to Non-Banking Financial Company-Microfinance Institutions (NBFC-MFIs) and MFIs for on lending to small borrowers.

The scheme aims to provide credit guarantee support through NCGTC to strengthen lending to MFIs, facilitates increased credit flow of up to Rs 20,000 crore to the NBFC- MFIs.

According to the salient features of the scheme, existing or new small borrowers within the regulatory definition of micro finance as prescribed by the RBI from time to time.

Guarantee coverage means 80 per cent of amount in default for small, 75 per cent for medium and 70 per cent for large NBFC-MFIs/ MFIs.

The scheme will facilitate increased credit flow to the MFI sector.

Microfinance plays a key role in financial inclusion by delivering credit to people at the bottom of the economic pyramid.

“NBFC-MFIs and MFIs are the key participants in the microfinance lending business. In view of ongoing financial stress in the microfinance sector, there has been a slowdown in lending by banks to MFIs due to which smaller MFIs are struggling to get loans,” said the official statement.

The scheme aims to encourage lending institutions to provide funding to NBFC-MFIs or MFIs for on lending to small borrowers within the regulatory definition of micro finance as prescribed by the Reserve Bank of India.

The scheme is valid till June 30, 2026 or loans till Rs 20,000 crores are guaranteed, whichever is earlier, the statement added.