For MSMEs operating in the agricultural value chain—whether input suppliers, aggregators, processing units, cold storage operators, or rural logistics providers—access to credit without requiring collateral is a game changer. Collateral requirements often act as a barrier for smaller agribusinesses that lack land title or real estate. In 2025, a growing number of collateral-free loan schemes and guarantee-based instruments are opening the door to more inclusive finance across agribusiness segments.
Why collateral-free loan matters for agri MSMEs?
Agriculture and its allied activities remain capital-intensive and seasonally cyclical. In India alone, the total farm credit target for FY 2025–26 is projected at around ₹31–32 lakh crore. Yet, many agri-value MSMEs struggle to convert growth potential into scale because they can’t meet collateral demands. A collateral-free loan reduces entry barriers and promotes innovation, especially in areas such as post-harvest handling, food processing, cold chains, farm machinery leasing, and rural aggregation.
Further, the intensifying push for financial inclusion and rural development is prompting regulators and the government to expand guarantee schemes and concessional credit. For example, as of April 1, 2025, the Government of India has enabled collateral-free loans of up to ₹10 crore under certain categories, with guarantee coverage of up to 90%. This move signals a strategic tilt toward enabling MSME financing without the friction of security liens.
Key collateral-free loan schemes and programs in 2025
- Credit Guarantee Schemes (CGTMSE / MSME Guarantee Funds): The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) enables unsecured term or working capital loans up to ₹1 crore per borrowing unit. For agri processors or cold storage operators seeking expansion, CGTMSE-backed loans can be a strong option.
- Collateral-free agricultural credit (RBI / KCC / MISS): In December 2024, the Reserve Bank of India raised the limit for collateral-free agricultural loans from ₹1.6 lakh to ₹2 lakh per borrower, effective January 2025. Similarly, the MISS (Minor Irrigation and Allied Support Scheme) limit was enhanced from ₹3 lakh to ₹5 lakh, enabling small-scale agri entrepreneurs to access funds for pumps, drip irrigation, or allied projects.
- MUDRA loans / Unsecured business loans: Under the Pradhan Mantri MUDRA Yojana (PMMY), micro enterprises can receive unsecured loans up to ₹10 lakh. This suits smaller MSMEs in packaging, logistics, and rural processing.
- Joint Liability Groups (JLGs) and SHGs: Group lending models continue to support rural enterprises by leveraging shared responsibility instead of collateral. MSMEs tied to Farmer Producer Organisations (FPOs) can use JLG structures to access unsecured loans collectively.
- Scheme-based enterprise development loans: Several government MSME development programs provide unsecured loans up to ₹3 lakh for micro enterprises along with capacity-building and infrastructure support.
The Agriwise advantage
While government and institutional schemes are widening access to collateral-free loan, MSMEs in the agri value chain often need customised lending solutions that reflect the realities of agriculture. This is where Agriwise Finserv, the NBFC arm of StarAgri, steps in:
- Farmer Scorecard & AgriBhumi integration: Lending decisions are backed by satellite-verified land intelligence and credit profiling, ensuring that even smallholder farmers and MSMEs get fair access to finance.
- Quick turnaround: With tech-driven processes, Agriwise ensures faster approvals and disbursements, a vital edge in time-sensitive agri cycles.
- Supply chain financing: Agriwise supports not just farmers but also input suppliers, aggregators, and processors, enabling smooth flow of working capital across the agricultural value chain.
By combining multiple loan products with data-backed assessments, Agriwise is empowering MSMEs and smallholders to scale sustainably without being excluded from formal finance.
Challenges & risks to mitigate
- Higher interest rates: Unsecured loans can be priced higher due to risk exposure.
- Guarantee fees: Some schemes add a cost layer in the form of guarantee fees.
- Loan size limitations: Many unsecured options are capped, requiring blended approaches for larger needs.
- Awareness gaps: Rural MSMEs often remain unaware of these schemes and rely heavily on intermediaries.
Conclusion
A collateral-free loan is emerging as a powerful enabler for MSMEs in India’s agri value chain. With policy reforms, guarantee coverage, and fintech-led innovations, 2025 marks a turning point for unsecured agri financing.
For MSMEs, the right strategy is to blend institutional schemes with sector-specialised lenders like Agriwise. By doing so, they can gain access to timely, collateral-free working capital and trade finance—unlocking new avenues for scaling operations, strengthening value chains, and driving rural economic growth.
