CBSE · Class 10 · Social Science · Economics: Money and CreditWhy do we need Self-Help Groups (SHGs) for the poor?

Self-Help Groups are needed for the poor primarily to overcome the problem of lack of collateral, which prevents them from getting loans from formal banking institutions. An SHG typically consists of 15-20 members belonging to one neighborhood who save and pool their resources together. It helps rural poor, especially women, to access timely micro-loans at reasonable interest rates without complex documentation, ultimately making them financially self-reliant and reducing dependence on informal moneylenders.