what is difference between bank loans taken directly and through SHG?
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There is difference between loans taken from bank directly and SHG . Bank provide loan on low interest whereas SHG does not. Bank is formally better than SHG.
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Difference between bank loans taken directly and through SHG:
- A self-help group (SHG) is a financial intermediary committee typically composed of 25-40 local men or women. A bank loan is the most common form of loan capital for a business. A bank loan provides medium or long-term finance .
- SHGs are a homogenous group of 10-20 people who collaborate for saving and internally assisting each other when necessary. Group members are involved in employment-based activities such as cattle rearing, running a retail shop, tailoring jobs, zari work, artificial jewelry, making candles, among others.
- Each person saves a fixed amount on a monthly basis and jointly agree to contribute towards a common fund of the SHG from where small loans are provided to only members for meeting their emergent and productive credit requirements at such interest rate, loan period and other terms and conditions as the group decides.
- Whereas bank loan is the extending of money in the form of a loan from a bank to any party for any purpose as required by the borrower with the agreement that the loan money will be repaid as per stipulated terms and conditions (as regards interest rate, a period of the loan, EMIs, etc). Bank loans are given to any individual as long as he/she meets the criteria.
To know more
What are self help group? write its four functions
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