Credit Guarantee Fund Scheme For Micro & Small Enterprises in Raipur, Chhattisgarh – 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 Raipur, Chhattisgarh 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 Raipur, Chhattisgarh 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 Raipur, Chhattisgarh.

What is the Credit Guarantee Fund Scheme in Raipur, Chhattisgarh?

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 Chhattisgarh

Chhattisgarh is an entirely landlocked and heavily forested state located in Central India. Earlier, Chhattisgarh used to be part of Madhya Pradesh, and on the first November 2000, it was granted statehood. In terms of area, Chhattisgarh is the 9th largest state and 17th most populous state in the country. Besides this, the state has the third-largest forest cover in the country, and it is surrounded by Madhya Pradesh, Maharashtra, Jharkhand, Odisha, and Telangana. Chhattisgarh also has the third-largest coal reserve in India. It is among the fastest developing states in India, is also rich in resources, and supplies electricity, coal, and steel to the rest of the country. Above all, Chhattisgarh won the title of the cleanest state in ‘Swachh Sarvekshan 2020.’
The economy of Chhattisgarh is the 17th largest state economy in India. Agriculture and industrial production are the key factors in enhancing the economy of Chhattisgarh. Talking about agriculture mainly, it is the chief economic occupation of Chhattisgarh. Most farmers in Chhattisgarh still practice agriculture through traditional cultivation and irrigation methods, which results in low growth rates and productivity. The complete modernization of Chhattisgarh Agriculture is yet to be achieved. For better implementation and growth, farmers must be aware of agriculture development and modern technologies. About 80% of the Chhattisgarh population is rural, and their main livelihood is agriculture or agriculture-based small industries. Top agriculture products grown in Chhattisgarh are rice, maize, small millets, pulses, oil seeds, groundnut, soya beans, sunflower, etc. Chhattisgarh is also known as the rice bowl of Central India.
The industrial sector is the second primary sector that contributes to the economy of Chhattisgarh. The industrial sector of Chhattisgarh consists of the power sector, steel sector, and aluminum sector.Chhattisgarh is counted among the states where the power is effectively developed. The Chhattisgarh State Electricity Board (CSEB) is efficient in meeting the electricity requirement of the state and holds a very good financial position.
Capital- Chhattisgarh

The startup ecosystem in Chhattisgarh
With an excellent education ecosystem, Chhattisgarh is registered as one of the fastest-growing states in India. The Chhattisgarh government has successfully been able to keep pace with the startup trend where the startups will be the future of social innovation. Chhattisgarh government has aspirations to become a global epicenter for entrepreneurship and innovation. So, the government is promoting sustainable and inclusive growth to enhance Global competitiveness by harnessing Research and Technology. To achieve this target, the Chhattisgarh government launched the ‘Chhattisgarh Innovation and Entrepreneurship Development Policy’ in 2016. The motive of the policy is to create a conducive environment for innovation and entrepreneurship.
The objectives of the Chhattisgarh Innovation and entrepreneurship development policy are as follows: –
The Chhattisgarh government wants to set up at least 100 Ventures through the policy.
The policy targets establishing accelerators/technology business incubators in the state to develop a robust startup ecosystem.
Through the policy, the government will link large innovative companies with the state and establish a startup infrastructure. The startup infrastructure will include accelerators, incubators, and research and development spaces.
To build a strong startup ecosystem, the Chhattisgarh government is conducting startup bootcamps in academics covering schools and Universities.
Through the startup policy of Chhattisgarh, the government wants to promote gender equality by encouraging and inviting women into the field of entrepreneurship.
The target of the policy is to make Chhattisgarh one of the top hubs of innovation and entrepreneurship in Asia and the world.

Startup ideas in Chhattisgarh
Agriculture and industries are the primary sources of economic development in Chhattisgarh. Besides this, the state is the country’s primary source of steel and electricity. So, if you are planning to start a business in Chhattisgarh, then here are a few startup ideas in Chhattisgarh that one can try:-

Sunflower farming
Chhattisgarh is naturally suitable for growing sunflowers, and the climatic conditions and soil provide the ideal sunflower farming environment. You can start a sunflower plantation or a sunflower oil extraction business. Sunflower farming is a very profitable business; compared to other vegetable oil, sunflower oil is considered a premium oil. So, if you combine sunflower farming with the sunflower oil extraction business, you can yield high profits.

Agribusiness
Agriculture is the primary and the most popular source of livelihood in India and Chhattisgarh. The fact that agriculture is the primary source of income in Chhattisgarh makes the agriculture and food processing business in Chhattisgarh a profitable business idea. If you have empty land suitable for cultivation, you can immediately start agriculture and sell those fruits and vegetables in the market. Besides this, you can also try your hands in the fisheries, meat, and poultry processing business. The agriculture and food processing business requires low investment and can help you earn long-term profits.

Cement plant and franchise
A cement franchise is also a good startup idea in Chhattisgarh. To set up cement plants in Chhattisgarh, one must have a lot of capital to invest in the cement franchise business. Though the cement plants are expensive to set up, after setting up the business, you can directly contact cement dealership companies like JK, UltraTech, Ambuja, Bangur, etc. Cement plants and cement franchises are profit-making businesses in Chhattisgarh.

Nylon production business
The nylon production business is profit-making as well as a unique idea. If you have technical skills and knowledge about the nylon production process, you can start a nylon production business in Chhattisgarh. First, you need to know that nylon is a prevalent fiber used globally for manufacturing carpets and stockings. It is also used as a raw material in dresses, lingerie, foundation garments, raincoats, blouses, swimwear, curtains, etc. Besides, nylon helps produce engineering polymers. To establish a nylon production business, one needs to put in a lot of effort, but once the business is completely established, it will provide you with high profits.

Steel production business
Being rich in minerals and steel, Chhattisgarh is the ideal destination to start a steel production company. The state is known for good quality steel products with high export value. If you have a basic idea of steel exports, you should try your hands at a steel production company. It is a profit-making business that requires considerable capital to invest.

Mineral business
Chhattisgarh is rich in minerals, so the mineral business in Chhattisgarh is undoubtedly an excellent startup idea. To start a mining business in Chhattisgarh, you must register it first. Besides the registration process, you should also know how to supply and export the mined products in the nearby markets. The knowledge of exporting minerals is essential to making the mineral business successful.

How the scheme does work in Raipur, Chhattisgarh?

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 Raipur, Chhattisgarh

      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 Raipur, Chhattisgarh

      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 Raipur, Chhattisgarh

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

        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 Raipur, Chhattisgarh

Benefits of the CGS Scheme in Raipur, Chhattisgarh

       i. Availability of Guarantee Cover for MSEs in Raipur, Chhattisgarh– 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 Raipur, Chhattisgarh– 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 Raipur, Chhattisgarh– 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 Raipur, Chhattisgarh– 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 Raipur, Chhattisgarh- 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 Raipur, Chhattisgarh– 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 Raipur, Chhattisgarh

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 Raipur, Chhattisgarh

Provided below is the step-by-step process of availing of the CGS scheme online in Raipur, Chhattisgarh-

      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.