Credit Guarantee

Financial Future with Credit Guarantee

Building bridges from informal to a formal economy
Building bridges from informal to a formal economy
What is a Credit Guarantee?

Credit Guarantee is a financial mechanism where a third party (often a government agency or a financial institution) promises to repay a loan, or a part of the loan, on behalf of a borrower if the borrower is unable to do so. In other words, it’s like having a “financial safety net” that helps lenders and financial institutions to offer credit to borrowers who don’t have sufficient collateral or strong credit history.

Credit guarantees bridge the gap between borrowers seeking loans and lenders assessing risks. It’s a collaborative effort between borrowers, lenders, and guarantors to provide a safety net that encourages lending and minimizes risk.

Why Credit Guarantee Matters
In a country as diverse as India, access to credit can be a challenge, particularly for those without established credit histories. CGs play a vital role in enhancing financial inclusion by encouraging lenders to extend credit to a broader range of borrowers, thereby fostering entrepreneurship and economic development.

Credit Guarantees step in to provide that extra layer of assurance, boosting confidence among lenders to extend loans to a wider range of borrowers who otherwise may not be eligible for such support. This not only supports economic growth but also empowers individuals and businesses to seize new opportunities.
Why Credit Guarantee Matters
In a country as diverse as India, access to credit can be a challenge, particularly for those without established credit histories. CGs play a vital role in enhancing financial inclusion by encouraging lenders to extend credit to a broader range of borrowers, thereby fostering entrepreneurship and economic development.

Credit Guarantees step in to provide that extra layer of assurance, boosting confidence among lenders to extend loans to a wider range of borrowers who otherwise may not be eligible for such support. This not only supports economic growth but also empowers individuals and businesses to seize new opportunities.

How CG Benefits Stakeholders

A Financial Inclusion Grant (FIG) supported credit guarantee provides New to Credit (NTC) and New to Business (NTB) borrowers, who lack a credit history or necessary collateral, with access to affordable credit from financial institutions (FIs). 

This solution offers several benefits to different stakeholders

Benefits for Participants:

  • Availability of high speed internet as a core utility for delivery of services to citizens.
  • Lowers interest rates for high-risk borrowers

Advantages for CSR and Philanthropic Donors

  • Serves as a catalyst for rapid and large-scale financial inclusion
  • Enables support underserved and vulnerable communities in a sustainable manner
  • Leverages philanthropic and CSR money to unlock market capital which can ensure long term sustainability and confidence in FIs to lend to riskier segments

Improving Access:

  • Accelerates “market making” and enables FIs to offer fit-for-purpose products for NTC segments.
  • Demonstrates the long-term commercial viability of lending to NTC segments without credit enhancement
  • Reduces risk and enables long-term lending to NTC segments .
  • A multi-year credit guarantee enables FIs to establish risk models that continue to support lending to NTC segments even after the guarantee is removed
Credit Gaurantee

    What Our Peers are Doing

    360 One Foundation

    Strategy and Policy, Project Management, and Program Assessment and Reporting.

    Latest News