MP Board · Class 10 · Social Science · Economics: Money and CreditWhat are the Self-Help Groups (SHGs) for the poor? Explain their functioning, objectives, and importance in rural India.

Introduction to Self-Help Groups (SHGs)\nSelf-Help Groups are small networks of poor people, mostly women, living in the same neighborhood or village, who pool their savings together. In recent years, SHGs have emerged as an innovative and effective way to provide micro-finance to rural poor, helping them overcome the problem of lack of collateral which prevents them from getting bank loans.

1. Objectives of SHGs

• Mobilization of Savings: To organize rural poor, particularly women, into small groups and encourage regular savings.
• Financial Inclusion: To provide self-employment opportunities by providing timely financial assistance without traditional heavy collateral.
• Empowerment: To build social capital and empower women by making them financially independent and decision-makers in households and society.

2. Functioning of SHGs

• Composition: A typical SHG has 15 to 20 members, usually belonging to one neighborhood, who meet and save regularly. The savings per member vary from Rs. 25 to Rs. 100 or more, depending on the ability of the people.
• Internal Lending: The group provides small loans to its members from its own savings pool to meet urgent needs like releasing mortgaged land, buying seeds, fertilizers, or meeting medical expenses.
• Bank Linkage: Once the group is regular in its savings for a year or two, it becomes eligible for taking loans from banks. The loan is sanctioned in the name of the group and creates self-employment opportunities.

3. Importance and Benefits of SHGs

• Overcoming Collateral Problem: Members can get loans without collateral at reasonable interest rates.
• Timely Credit: Loans are available for various purposes and at a much lower interest rate than local moneylenders.
• Social Platform: SHGs serve as a regular platform for women to discuss and act on various social issues like health, domestic violence, dowry, and child marriage.
• Regular Repayment: Due to peer pressure and group responsibility, the rate of loan repayment in SHGs is remarkably high, which builds trust among banks to advance further credit.