Exploring Government-Supported Micro Loan Programmes for MSMEs

India's micro and small industries, which employ 20 crore people and account for 30% of the nation's GDP, are the backbone of the nation. According to Union Finance Minister Nirmala Sitharaman, micro, small, and medium-sized enterprises will be crucial to achieving the goal of making India a developed country by 2047.

Government-supported micro loan programmes empower entrepreneurs by providing them with financial assistance at competitive interest rates and favourable terms. If you are an entrepreneur looking for SME finance options, understanding government loans can be a game-changer for your business.

Government Micro Loans for MSMEs

1. Pradhan Mantri Mudra Yojana

The Pradhan Mantri Mudra Yojana (PMMY) is a flagship initiative by the Government of India aimed at providing financial assistance to small businesses in the form of loans up to ₹10 lakhs. Under PMMY, loans are classified into three categories:

1. Shishu: Loans up to ₹50,000 for businesses in their early stages.
2. Kishore: Loans ranging from ₹50,001 to ₹5 lakh for businesses that have already started but need further financial support.
3. Tarun: Loans ranging from ₹5,00,001 to ₹10 lakh for established businesses looking to expand their operations.

Loans can be obtained from various financial institutions like banks, NBFCs, and MFIs, with interest rates and repayment terms varying depending on the institution.

2. Credit Guarantee Fund Trust for Micro and Small Enterprises

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a scheme by the Indian Government and SIDBI that offers collateral-free credit facilities to MSMEs. Eligible MSMEs can access loans up to ₹2 crore without collateral or third-party guarantee. The guarantee cover ranges from 50% to 85% of the loan amount. This scheme promotes entrepreneurship by reducing lending risk for MSMEs, encouraging lenders to extend credit to those with limited assets or collateral.

3. Stand-Up India

The Stand-Up India scheme is a government initiative aimed at promoting entrepreneurship among women and marginalised individuals. It provides government micro loans MSMEs ranging from ₹10 lakhs to ₹1 crore for setting up new enterprises or expanding existing ones. At least one-third of these loans are reserved for women entrepreneurs. These loans can be used for plant and machinery acquisition, working capital, or other business-related expenses, with a repayment period of up to 7 years.

4. National Small Industries Corporation (NSIC) Subsidy Schemes

The National Small Industries Corporation (NSIC) offers various subsidy schemes to support MSMEs in India. These schemes aim to enhance the competitiveness of small businesses by providing them with access to modern technology, marketing assistance, and other support services.

5. The Prime Minister Employment Generation Programme (PMEGP)

The Prime Minister Employment Generation Programme (PMEGP) is a credit-linked subsidy programme that promotes self-employment in rural and urban areas. It offers government loans to entrepreneurs or groups to set up micro-enterprises, with the remaining cost financed by banks or financial institutions.

6. Raising and Accelerating MSME Performance (RAMP)

SIDBI launched the Raising and Accelerating MSME Performance (RAMP) programme to support MSMEs in India. RAMP aims to bridge financing gaps and provide necessary support for operations. MSMEs can access debt or equity financing for capacity expansion, technology upgrades, marketing, branding, and working capital requirements through a network of partner financial institutions.

7. MSME Business Loans in 59 Minutes

The Indian government launched the MSME Business Loans in 59 Minutes scheme, offering SME finance up to ₹1 crore in 59 minutes through an online portal. The scheme uses advanced algorithms and data analytics to assess creditworthiness based on GST returns, income tax returns, bank statements, and other relevant information. The loan amount can be used for working capital, machinery purchases, or business expansion, with interest rates and repayment terms varying depending on the lending institution.

8. SIDBI Make in India Soft Loan Fund for MSMEs (SMILE)

SIDBI's Make in India Soft Loan Fund for MSMEs (SMILE) offers concessional interest loans ranging from ₹10 lakh to ₹1 crore to eligible enterprises. These loans can be used for land acquisition, plant and machinery purchases, or working capital needs. SMILE aims to provide affordable, flexible financing options, enabling MSMEs to scale up operations, create employment, and contribute to the Make in India initiative.

9. Bank Credit Facilitation Scheme

The Bank Credit Facilitation Scheme is a government initiative that offers a guarantee cover of up to 85% of a loan amount to MSMEs, allowing them to access credit without collateral security or third-party guarantees. This reduces lenders' risk and encourages them to extend credit to small businesses. The scheme can be used for working capital, machinery procurement, expansion, and new ventures.

10. Scheme of Fund for Regeneration of Traditional Industries (SFURTI)

The Scheme of Fund for Regeneration of Traditional Industries (SFURTI) is a government initiative by the Ministry of Micro, Small, and Medium Enterprises (MSMEs) to boost the competitiveness of traditional industries. It provides financial support for skill development, capacity building, infrastructure development, technology upgradation, marketing support, and cluster development through selected implementing agencies.