Question

shg can help in solving the problem of credit in rural areas explain

Answer 1

here is ur answer


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1 SELF HELP GROUPS helps poorpeople to pool their savings
2 these are mainly maintained by women and hence helps in women empowerment
3 poor are able to start their business from savings
4 it provides loan to the members of the group at the
time of needs

Answer 2

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.