SharePoint Folder External sharing not working

[Jey_Ganesh]

We have already enabled External sharing in the following areas of our SharePoint online.

1. SharePoint admin Sharing
2. Team site sharing, 

But when we try to share the document folder to external user its shows the following error.

"Your organization's policy dont allow you to share with these user."

It's working previously without any issue... but now not working... Does any SharePoint update impact this?

Or we have to do any other settings?

[#2]

@Jey_Ganesh Hi, you should walk through the Microsoft 365 guest sharing settings reference

[#3]

Our problem is not possible to share the folders only. we can share individual document files.

Our target shares the particular folder only in that document library.