New Delhi, March 23 -- The government has launched a Rs.20,000 crore credit guarantee scheme for microfinance institutions to revive lending in the microfinance sector, which has been hit by a prolonged period of stress. The move is aimed at restoring lender confidence and improving credit flow to small borrowers. What does it mean for the sector. Mint explains.

The Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0), effective 20 March 2026, provides partial credit guarantee to banks and financial institutions for loans extended to non-banks and other microfinance institutions (MFI) for onward lending to small borrowers.

The scheme will remain open until 30 June 2026 or until guarantees worth Rs.20,000 crore are issu...