Describe the role of the SHG in providing a better financial facility for rural household.
Answers
What are SHGs?
Self-Help Groups (SHGs) are informal associations of people who choose to come together to find ways to improve their living conditions.
It can be defined as self governed, peer controlled information group of people with similar socio-economic background and having a desire to collectively perform common purpose.
Villages face numerous problems related to poverty, illiteracy, lack of skills, lack of formal credit etc. These problems cannot be tackled at an individual level and need collective efforts.
Thus SHG can become a vehicle of change for the poor and marginalized. SHG rely on the notion of “Self Help” to encourage self-employment and poverty alleviation.
Functions
It looks to build the functional capacity of the poor and the marginalized in the field of employment and income generating activities.
It resolves conflicts through collective leadership and mutual discussion.
It provides collateral free loan with terms decided by the group at the market driven rates.
Such groups work as a collective guarantee system for members who propose to borrow from organised sources. The poor collect their savings and save it in banks. In return they receive easy access to loans with a small rate of interest to start their micro unit enterprise.
Consequently, Self-Help Groups have emerged as the most effective mechanism for delivery of microfinance services to the poor.
Answer:
the SHG help the borrower to overcome the problem of lack of collateral
they can get timely loan for a variety of purpose and at a reasonable interest rate
SHG are the building blocks of organisation of the rural poor