Credit Guarantee Fund Scheme For Micro & Small Enterprises in Imphal, Manipur – Meaning, Features, Pre-requisites, Benefits, Duration, Process

A bankable business idea remains a mere idea without the necessary guidance and funds. It’s a known fact that Imphal, Manipur is growing large in terms of economic development and business entrepreneurship, witnessing more than six crores of micro and small enterprises under the organized as well as unorganized sectors. Micro, Small, and Medium Enterprises hold an immense contribution to the socio-economic development of the country.

For years, MSMEs have played a key role in the economic upliftment of the economy by creating wealth, bringing foreign reserves to the nation, and creating employment opportunities all over the country. Till today, they account for at least 30-40% of GDP and around 48% of total exports and support bigger corporations by supplying raw materials and related goods to them. Micro, Small, and Medium Enterprises Development Act, 2006 introduce and defines micro, small and medium enterprise businesses according to their annual turnover and investments in the plant & pieces of machinery in the business.

However, the most challenging aspect faced by the MSMEs in Imphal, Manipur is to meet competition against competitors in the relevant market with limited resources, which affects their organizations as well as their developmental growth. Be it the requirement of working capital, purchase of assets or pieces of equipment, advertisement or promotion-related costs, or labor costs, MSMEs need funds for various purposes which couldn’t be fulfilled through savings only. This problem is even worse in the case of first-generation entrepreneurs who have little idea about the sources of raising or seeking funds and the manner of doing the same.

Usually, the first thing that comes into mind is business loans, but it is often difficult to avail of business loans when the start-ups are at a nascent stage due to the higher perceived risk amongst banks in lending to MSEs. Therefore, realizing the need to develop a strong stimulus to MSMEs to ensure there is the adequacy of liquidity maintained in the business operations of government and financial institutions, the Government of India has introduced as many as 50 schemes with various objectives to ensure seamless flow of credit delivery to MSMEs, one of which is the Credit Guarantee Scheme. The article mentioned below describes all the meaning & objectives, benefits, eligibility, and fiscal incentives extended to MSEs under the scheme in Imphal, Manipur.

What is the Credit Guarantee Fund Scheme in Imphal, Manipur?

As part of the Start-up India action plan in 2017, this scheme was reformed under the mutual efforts of the Ministry of MSME, Govt. of India with the Small Industries Development Bank of India (SIDBI) under the administration of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). For effective implementation of the schema Credit Guarantee Fund Trust has been created under which the Government and SIDBI contribute in the ratio of 4:1 for the corpus of the fund.

The CGFS scheme was launched with the purpose to strengthen the credit delivery system and smoothening the flow of credit to the MSE through the access of funds to the unserved, under-served and underprivileged to help the movement of funds from conventional lenders to new generation entrepreneurs. The CGS scheme has been instrumental in affording guarantee covers to collateral and/or third-party guarantee-free credit facilities extended by eligible Member Lending Institution (MLIs) to MSEs.

Credit Guarantee Fund Scheme For Micro & Small Enterprises in Manipur

Manipur is one of the states among the seven sisters of northeast India. Nagaland, Mizoram, and Assam border it and share international borders with Myanmar. During British rule, Manipur used to be a princely state. The state joined India on 11th August 1947 after the signature of the instrument of accession by Maharaja Budhachandra. The state’s official language is Manipuri, and the state consists of a 41% tribal population. There are different ethnic groups in Manipur that practice a variety of religions. As per the 2011 census, Hinduism is the major religion of Manipur, followed by Islam, Christianity, Buddhism, Judaism, and Sanamahism.
The state’s economy is primarily dependent on agriculture and has significant hydroelectric power generation potential. Imphal airport is an international airport that connects the state to the whole world. The natural climate and soil of Manipur are ideal for horticulture crops. Many rare and exotic medicinal and aromatic plants are found in Manipur. Major cash crops grown in the state are cashew, lichi, walnuts, lemon, papaya, pineapple, orange, peach, plum, and pear. The majority of cultivators in Manipur are women. The people of Manipur still follow the traditional cultivation method, so agricultural modernization is yet to be founded in Manipur. The best tourist season to visit Manipur is October to February. The state has rich culture and values. It is said that Polo, the royal game originated in Manipur.
Capital- Imphal

The startup ecosystem of Manipur
Manipur is slow but steadily began to take the initiative towards creating a robust startup ecosystem. The Manipur government outlined its startup policy in 2016. The startup policy of Manipur is known as the ‘Manipur startup policy.’ The vision of the startup policy is to make Manipur a top startup destination in the north-eastern region by taking different initiatives.
Under the startup policy, the Manipur government has established a startup cell in the state planning department. The motto behind establishing the startup cell is the implementation of the startup policy of the state. Through the startup policy, the Manipur government targets to build a strong startup ecosystem by assisting startups at various stages like pre-idea, idea, or prototype.
Through the startup policy, the state wants to create a Network of Entrepreneurship Development Centres (NEDC) with universities and institutions of higher education. The state will create a mentor expert network for startups. The valid startup policy of Manipur is yet to be notified, and the policy’s implementation date and guidelines will be drafted post-launch.

Top business ideas in Manipur
Manipur is known as ‘India’s gateway to the East.’ The state has an agricultural economy. Besides agriculture, it is dependent on industries, tourism, and mining for its economic development. The different crops grown in Manipur includes pulses, wheat, maize, rice, etc. If you aspire to set up a small business in Manipur following are the best options: –

Craft making
Manipur has a rich culture, and the craft of Manipur is famous worldwide. Women of Manipur make different decorative items and crafts. These are not random and ordinary crafts, but they reflect the culture and tradition of Manipur. The traditional decoration supplies and handicrafts of Manipur will always be in high demand, so setting up a craft-making business in Manipur can make you huge profits with less investment.

Handloom business
The Handloom industry of Manipur is famous for its colorful and cultural textures. For the local people, the handloom industry is a major source of livelihood. The women of Manipur are majorly engaged in the handloom industry; they have inherited this skill from their ancestors. Above all, the Manipur Handloom and Handicraft Department Corporation and the state government are also trying to market local artisans’ handloom products. So, a handloom industry in Manipur is also a good startup option. To establish the handloom industry in Manipur, you must contact local artisans, especially women.

Food processing business
Manipur is agricultural land, so the food processing industry is an ideal option in Manipur. Even the Government of Manipur is also trying to promote and develop the food industry by implementing different schemes under the central sector schemes. Besides, the state government is planning an initiative to open a food park at Nilakuthi. With the state government’s schemes, the food processing business will surely make good profits. This is a low-investment business but will help you make long-term profits.

Bamboo industry
Manipur has a lot of bamboo as it is rich in bamboo production. Majorly women are involved in the production of bamboo. By setting up, the bamboo industry you will create employment opportunities for local artisans. Besides this, bamboo is a crucial part of traditional cuisine in the North-Eastern states. So, it is surely a good small-scale business idea, especially for ladies living in rural areas as they know bamboo production and related activities.

How the scheme does work in Imphal, Manipur?

By entering partnerships with over 100 member lending institutions (including scheduled banks, regional rural banks, and cooperative banks), the scheme offers guarantee cover for insufficient or no collateral to businesses in dire need of funds for their business. They benefit the member lending institutions by assuring up to 85 to 90% of repayments in case the borrower MSE defaults on the payments, and on the other hand, support businesses by emphasizing lending institutions to focus more on the viability of the businesses rather than collateral or third-party guarantees.

Not only this, but the CGS scheme has also introduced another scheme to offer financial support to stressed MSEs through guarantee coverage for providing personal loans through banks to promoters of the stressed MSMEs for infusion of equity/quasi-equity/sub-debt in the businesses who are eligible for restructuring as per RBI guidelines, which is known as CGS Sub-Debt Scheme. Here, the proportion of guarantee coverage between CGSTMSE to promoters of stressed MSEs will be 9:1.

Features of the Credit Guarantee Scheme in Imphal, Manipur

      i. The MSE must be recognized as a start-up by the Department of Industrial Policy and Promotion (DIPP) for the purpose of being eligible for the credit guarantee.

      ii. The guarantee covers must be offered based on portfolios and there must be at least 10 start-up loans for any particular financial year.

      iii. The credit guarantee cover so offered may include any other monetary assistance such as Venture capital, working capital, debentures, optionally convertible debt, term loans, etc. up to a sum of Rs. 5 crores to every eligible MSE start-up.

     iv. Credit guarantee offers loans of composite nature which may include unsecured term loans or working capital loans or both.

       v. The loans so offered do not need collateral or a third-party guarantee from the borrower.

     vi.  In case the borrower becomes financially sick during the tenure of the loan, the member lender institution may also offer rehabilitation facilities

      vii.  The minimum guarantee cover is 50% while the Maximum guarantee cover could go up to 85% of the loan amount only.

Eligibility of the CGS Scheme in Imphal, Manipur

      i. All New and existing MSE enterprises engaged in either manufacturing or service activity shall be eligible to avail of this scheme.

      ii. However, businesses engaged in activities such as education, agriculture, Self-help Groups (SHGs), training institutions, etc. shall not be entitled to avail of this scheme.

      iii. Each borrower MSE should have a valid PAN number before availing of a credit facility from the eligible lending institution apart from with no history of default in loan repayments.

      iv. Borrower MSEs shall also be eligible to seek & obtain joint financing (such as term loan from State financial institution and Working capital from a commercial bank), but sharing of securities will not be allowed to start-ups.

      v. In terms of lenders, there are more than 133 eligible banks/financial institutions registered as member lending institutions with CGTMSE.

Pre-requisites of CGSS in Imphal, Manipur

     i. It shall be compulsory for every borrower start-up MSE to complete the KYC process for the following persons in Imphal, Manipur-

        a. For all resident partners or directors – submission of a copy of the Aadhaar

         b. For all non-resident partners or directors – a copy of the passport.

       ii. The management of the National Credit Guarantee Trust Company will administer the functioning of the scheme and set the terms and rules for its functioning as it sees fit.

       iii. A Management Committee shall be formed to monitor the Credit Guarantee Scheme for MSMEs

       iv. A Risk Evaluation Committee shall be constituted to undertake and address issues related to any conflicts of interest that may arise in any case.

Guarantee Cover Fees under the CGSS scheme in Imphal, Manipur

Benefits of the CGS Scheme in Imphal, Manipur

       i. Availability of Guarantee Cover for MSEs in Imphal, Manipur– The primary purpose of the CGS scheme is to offer a seamless credit delivery facility to MSEs by resolving the problem of collateral or guarantee. Thus, availing of this scheme relieves MSEs from arranging collaterals or looking for third-party guarantors to avail business loans for their business.

       ii. Boosts Participation of Women Entrepreneurs in Business Industry in Imphal, Manipur– For encouraging the participation and contribution of women entrepreneurs in the Indian business ecosystem, the scheme offers special guarantee cover rates (up to 80% of the loan amounts) to MSE units either operated and/or owned by women.

      iii. Reassurance to MLIs in Imphal, Manipur– Generally, banks or financial institutions are reluctant to offer loan facilities to start-ups and MSEs at the early stages of development due to higher risks of business failures or payment defaults by borrowers involved. Therefore, the CGS scheme reassures the MLIs that the Guarantee Trust would make good the loss incurred by the lender up to 50/75/80/85 percent of the credit facility in case of payment defaults by the borrower.

       iv. Ensuring the seamless flow of Credit Delivery in Imphal, Manipur– Since the CGTMSE affords guarantee cover for the borrower MSE, it emphasizes the seamless flow of credit delivery for working capital or other business purposes based on the viability of the profit-making business idea of the start-up MSE.

       v. Encourages a spirit of Entrepreneurship in Imphal, Manipur- CGS is primarily focused on supporting the entrepreneurial zeal of millions of youth who are first-generation entrepreneurs having bankable business ideas by helping them to set their viable micro and small enterprises, ultimately making them job providers from job seekers.

       vi. Financial support to stressed MSEs in Imphal, Manipur– Finally, the CGS scheme for financially stressed MSEs is aimed at helping in the restructuring of the business unit through a guarantee covering up to 90% of such MSEs.

Fiscal Incentives in Imphal, Manipur

Under the scheme, all new and existing micro and small units will be eligible to avail of loans with any collateral/third party guarantee free credit facility (including both fund and non-fund based) facilities including Service Enterprises with a maximum limit of Rs. 2 crores per unit for term loans and/or working capital loan facilities. Lately, the CGSS scheme has also extended guarantee coverage facilities to certain NBFCs and Small Finance Banks.

The guarantee cover available under the scheme will be available to the extent of (50% or 75% or 80% or 85%) of the approved amount of the credit facility.  However, in case any default is committed by the borrower MSE, then the CGSTMSE will settle the claim with up to 75% of the amount in default of the credit facility extended by the lending institution for credit facilities up to 2Crores. The applicable fiscal interventions have been provided below-

Duration for Repayment with Moratorium Period for CGS

The credit guarantee will begin from the date of the payment of the guarantee fee by the borrower MSE till the agreed term of the credit facilities in case of term loans/composite loans, whereas in the case where only working capital facilities have been availed by the borrower then for five years or such period as may be specified by the CGTMSE in this behalf.

Process of Availing CGS Scheme online in Imphal, Manipur

Provided below is the step-by-step process of availing of the CGS scheme online in Imphal, Manipur-

      i. The first and the foremost step to avail of this scheme is to arrange all important documents, projected financial statements, and properly laid business loans. The business plan should reflect the viability of the project.

      ii. Once, the business model is constructed properly, the MSE unit should carefully choose any bank/financial institution to avail credit facilities from the CGTMSE portal where such lender is a member lending institution.

      iii. Once, it is done an application for a loan along with the business plans is to be submitted. The bank will check the documents and business plans and submit a copy of the same to the CGTMSE if it finds everything is in order and correct.

      iv. On receipt of the application, the CGTMSE will scrutinize the application again and on being satisfied will instruct the bank to release funds for the business.

      v. Upon receipt of approval of the credit facility, the borrower will be required to pay the CGTMSE guarantee and service fee.

Therefore, the CGSF is a beneficial scheme for MSEs and start-ups which relieves the pressure of finding guarantors or arranging collaterals, which is hard for businesses in the initial years. With a track record of approving and providing guarantee covers worth Rs.45,821 crores, the scheme has gained 52% growth in coverage terms of the amount which has led to its significant popularity among MSEs. While expanding its scope to cover segments such as partially collateralized loans, Retail Trade, and uncovered lenders like NBFCs Small Finance Banks, and Scheduled Co-Operative Banks.

With increased awareness, now MSEs looking for credit facilities will approach lenders to avail of loan facilities under the CGS scheme and tackle any financial shortcomings that may come in the way of their business. CGS Features like credit delivery facilities at attractive interest rates, with a guarantee to cover between 75-85 % of the loan amount from more than 133 member lending institutions covering a wide range of business activities, will offer promising prospects to boost entrepreneurship among youth generation making them job providers rather than job seekers and even helping in employment generation prospects for the nation for a developed economy.