self help groups play a crucial role in solving the problem of credit in rural areas support the statement with three arguments
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Answers
Explanation:
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.
Need for SHGs
One of the reasons for rural poverty in our country is low access to credit and financial services.
A Committee constituted under the chairmanship of Dr. C. Rangarajan to prepare a comprehensive report on 'Financial Inclusion in the Country' identified four major reasons for lack of financial inclusion:
Inability to provide collateral security,
Poor credit absorption capacity,
Inadequate reach of the institutions, and
Weak community network.
The existence of sound community networks in villages is increasingly being recognised as one of the most important elements of credit linkage in the rural areas.
They help in accessing credit to the poor and thus, play a critical role in poverty alleviation.
They also help to build social capital among the poor, especially women. This empowers women and gives them greater voice in the society.
Financial independence through self-employment has many externalities such as improved literacy levels, better health care and even better family planning.
Answer:
Self-help Groups (SHGs) are loosely organized organizations where people gather to discuss how to better their living circumstances. They typically exercise self-discipline and peer control.
People from similar social and economic backgrounds frequently work together with the aid of any NGO or government organization to address their problems and enhance their quality of life.
Explanation:
SHGs are groups of individuals from a village that have between 10 and 15 members. They collect 20 to 25 rupees per week from each member of the group, deposit it in the bank to earn interest, and then use that money to lend to underprivileged and needy people. SHGs' primary goal is to provide loans to the underprivileged at extremely low-interest rates.
- They receive a loan with a fair interest rate.
- It aids borrowers in overcoming the issue of inadequate documentation and collateral.
- It protects them from being taken advantage of by lenders.
- The members can now use this interest revenue as a secondary source of income.
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