The
Microfinance Industry Network (MFIN) welcomes the Government of India’s launch
of the Credit Guarantee Scheme for Microfinance Institutions – 2.0 (CGSMFI-2.0),
a timely intervention to ease liquidity constraints and strengthen the flow of
institutional credit to underserved segments.
This
development follows sustained advocacy by MFIN with the Government and key
stakeholders to address the ongoing funding constraints faced by the sector.
The introduction of the scheme marks an important step towards restoring lender
confidence and improving credit flow, particularly for small and medium MFIs,
which have seen a dip of ~70% in bank funding, between Q4 FY 2023-24 and Q3 FY
2025-26.
The launch
comes at a critical juncture. While portfolio quality has improved, with PAR 31-90
days declining to 1.6% from 3.2% a year ago, constrained liquidity continues to
impact growth and outreach. The sector’s portfolio stood at ₹3,14,728 crore as
of December 31, 2025, reflecting a 7.3% decline from September 30, 2025. It is
to be noted that, due to liquidity constraints, MFIN estimates that nearly 50
lakh borrowers are estimated to have lost access to formal credit, underscoring
the urgent need to restore funding flows.
The scheme
is expected to catalyse bank lending by restoring lender confidence, improving
credit flow, and supporting sustainable sectoral growth, while upholding
customer protection and responsible finance principles.
Dr. Alok
Misra, CEO & Director, MFIN, said: “We welcome the Government’s launch
of CGSMFI 2.0, which is timely to address the current challenges faced by the
microfinance sector. The sector has demonstrated strong improvement in credit
quality and adherence to responsible lending practices. The key constraint has
been the availability of bank funding. This scheme will play a critical role in
unlocking liquidity, particularly for small and medium MFIs, and ensuring that
affordable credit continues to reach low-income households.”