Under the scheme, also called the Export Credit Insurance Scheme (ECIS), up to 90 per cent of the principal and interest is covered.
The ministry has also proposed to subsidise the premium under the scheme that has to be paid by exporters of certain key sectors.
The Export Credit Guarantee Corporation currently provides credit guarantee of up to 60 per cent loss.
The development assumes significance as exporters have raised concerns over availability of credit.
Commenting on the budget proposal, global trade information platform Connect2India.com founder and CEO Pawan Gupta said that the scheme should improve the export credit and insurance availability for MSME exporters.
"With high insurance cover, reduction in premium for small exporters and simplified procedures for claim settlements, the scheme is expected to achieve higher export credit disbursement, and would thus immensely help the existing MSME exporters as well as encourage the first time exporters to explore global opportunities," he said.
He said that this announcement is expected to address and mitigate both the export finance and trade risk issues, the key challenges for MSME exporters.
The country's exports contracted for a fifth month in a row by 1.8 per cent in December 2019 to USD 27.36 billion.
During April-December 2019-20, exports slipped 1.96 per cent to USD 239.29 billion, imports declined 8.9 per cent to USD 357.39 billion, leaving a trade deficit of USD 118.10 billion.
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