Question

what is difference between bank loans taken directly and through SHG?

Answer 1

Bank loans are given directly to borrowers, on application, after certain conditions are met and verified by the Bank, viz. the borrowers creditworthiness and/or credit history, loan repayment capacity, residence status, proof of identity, defined purpose for which a specific loan is required etc. Generally, collateral securities have to be provided by the borrowers.

SHGs or self-help groups are village-based groups, comprising generally of 10-20 women or men, generally not mixed, which act as financial intermediary committees. Members of SHGs make regular contributions to build up capital for the group, which then lends to the members as per requirement and availability of funds. Some SHGs are linked to Banks for capital and they extend small loans to impoverished borrowers who do not have a credit history nor can provide collateral securities.   

Answer 2

Self help Groups or SHG provide loans at a very reasonable rate of interest and time period. And unlike the bank loans they do not need collateral or documents and thus we can get loans easier in less time from them