Question

Mention the functions of self help groups
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Answer 1

Answer:

What are the functions of the SHGs? Initiate and maintain savings within the group: All members must regularly save at least a small amount. These savings allow them to get future credits for their group. Lending loans to the members: The savings made by the SHG must be used to provide loans to members of the group.

Answer 2

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Functions of Self Help Groups

• They try to build the functional capacity of poor and marginalised sections of society in the domain of employment and income-generating activities.
• They offer collateral-free loans to sections of people that generally find it hard to get loans from banks.
• They also resolve conflicts via mutual discussions and collective leadership.
• They are an important source of microfinance services to the poor.
• They act as a go-through for formal banking services to reach the poor, especially in rural areas.
• They also encourage the habit of saving among the poor.
• Need for Self Help Groups
• One of the chief reasons for rural poverty is the lack of access or limited access to credit and financial services.
• The Rangarajan Committee Report highlighted four major reasons for lack of financial inclusion in India. They are:
• Inability to give collateral security
• Weak credit absorption capacity
• The insufficient reach of institutions
• Weak community network
• It is being recognised that one of the most important elements of credit linkage in rural areas is the prevalence of sound community networks in Indian villages.
• SHGs play a vital role in giving credit access to the poor and this is extremely crucial in poverty alleviation.
• They also play a great role in empowering women because SHGs help women from economically weaker sections build social capital.
• Financial independence through self-employment opportunities also helps improve other development factors such as literacy levels, improved healthcare and better family planning.