Q. 194.5( 2 Votes )

‘Self-help Groups

Answer :

Self-help Groups (SHG’s) have brought about a revolutionary change in the rural sector because of its unique idea of self-sustenance and financial independence in the lives of the rural poor. The basic objective of the SHG’s is to organize the rural poor, in particular, women, into small groups so that they can pool in their savings. Usually belonging to one neighbourhood, these SHG’s consist of 15-20 members who meet and save regularly. The savings per member varies from Rs 25 to Rs 100 or more, depending upon the ability of the people to save.

1. Member of these SHG’s can take small loans from the group itself to meet their needs such as for releasing mortgaged land, for meeting working capital needs or for buying housing materials etc. Although the group charges interest on these loans, but it is way less than the interest charged by the moneylenders present in villages.

2. Saving on a regular basis, after a year or two, the group also becomes eligible for availing loan from the bank. The loan is sanctioned in the name of the group and is meant to create self-employment opportunities for the members.

3. The SHG’s not only collect and save money regularly but also provide the members of the group, an opportunity to discuss regarding the amount of loan and the interest rate to be charged. It, therefore, provides a platform to seek financial independence to the rural poor and women.

4. The SHG’s help borrowers overcome the problem of lack of collateral while getting loans. Being the building blocks of organizing the rural poor, they also provide a platform to discuss and act on a variety of issues such as health, nutrition, domestic violence, etc.

5. For example- The Grameen Bank of Bangladesh has successfully managed to reach the poor in meeting their credit needs at reasonable rates. Started as a small project in the 1970s, it has reached to millions of people, most of which are women coming from poorest sections of the society. Proved as reliable borrowers, these women have also showcased their ability to run income-generating activities.

NOTE In rural areas, informal lending is a common practice. Moneylenders are the major forces of providing credit to the rural poor. However, the lending activities of these moneylenders are very exploitative in nature as there is no organization to regulate them and they charge very high levels of interest rates. The initiative of SHG’s is a positive sign which solves the major problem of credit in rural areas. In addition to this, it is also a platform that empowers people in making them financially independent.

Important – The above answer discusses Self-help Groups in great detail. Students are supposed to write in accordance with the marking scheme of the question paper.

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