What is the basic idea behind the SHGs for the poor? Explain in your own words.
What is the basic idea behind the SHGs for the poor? Explain in your own words.
Usually banks do not have a presence in every rural area of India. Even if banks are present, it is difficult for the poor people and poor farmers to obtain loans from banks because they need collateral against loans and require proper documentation.
It is easy to get loans from informal sources, as they might know each other personally, but the interest rates are very high, they keep no records of the transactions and harass the poor borrowers and poor people end up in debt trap. Due to the above factors poor people in rural areas rely on informal sources of loans, such as money lenders.
Self Help Groups (SHG)
To sort the above problems some newer ways of providing loans to the poor were created.
- With a particular focus on women, the idea is to organise rural poor, into small Self Help Groups (SHGs). Usually a Self Help Group will have people from the neighbourhood, who will meet regularly and save regularly.
- To meet the needs of the Members of Self Help Group, they can take small loans from the group itself.
- In Self Help Groups (SHG), the members will collect or pool their savings.
- The group decides about the loans to be granted — the amount, interest to be charged, repayment schedule, purpose etc.
- The interest on these loans will be charged by the group, which will be lesser than interest rates charged by moneylenders.
- Most of the important decisions regarding the loan activities and savings are taken by the group members.
- Depending on the capacity of the members of the Self Help Group (SHG) to save, savings per member will be in the range of Rs 25 to Rs 100 or more.
- Self Help Group (SHG) will become eligible for availing loans from the banks, provided the Self Help Group is regular in savings for a span of one or two years.
- To create self employment opportunities for the members, loans will be sanctioned by the banks in the name of the self-help group.
- The repayment of the loan is the responsibility of the group.
- When organised through SHG, even if poor women have no collateral as such, banks are willing to provide loans to the poor women, because other members of the SHG will follow up seriously if there arises an issue of non payment of loan.
- SHGs are the building blocks of organisation of the rural poor.
- Self Help Groups (SHG) is also a platform to act and discuss on other issues such as domestic violence, health, nutrition etc.
Usually banks do not have a presence in every rural area of India. Even if banks are present, it is difficult for the poor people and poor farmers to obtain loans from banks because they need collateral against loans and require proper documentation.
It is easy to get loans from informal sources, as they might know each other personally, but the interest rates are very high, they keep no records of the transactions and harass the poor borrowers and poor people end up in debt trap. Due to the above factors poor people in rural areas rely on informal sources of loans, such as money lenders.
Self Help Groups (SHG)
To sort the above problems some newer ways of providing loans to the poor were created.
- With a particular focus on women, the idea is to organise rural poor, into small Self Help Groups (SHGs). Usually a Self Help Group will have people from the neighbourhood, who will meet regularly and save regularly.
- To meet the needs of the Members of Self Help Group, they can take small loans from the group itself.
- In Self Help Groups (SHG), the members will collect or pool their savings.
- The group decides about the loans to be granted — the amount, interest to be charged, repayment schedule, purpose etc.
- The interest on these loans will be charged by the group, which will be lesser than interest rates charged by moneylenders.
- Most of the important decisions regarding the loan activities and savings are taken by the group members.
- Depending on the capacity of the members of the Self Help Group (SHG) to save, savings per member will be in the range of Rs 25 to Rs 100 or more.
- Self Help Group (SHG) will become eligible for availing loans from the banks, provided the Self Help Group is regular in savings for a span of one or two years.
- To create self employment opportunities for the members, loans will be sanctioned by the banks in the name of the self-help group.
- The repayment of the loan is the responsibility of the group.
- When organised through SHG, even if poor women have no collateral as such, banks are willing to provide loans to the poor women, because other members of the SHG will follow up seriously if there arises an issue of non payment of loan.
- SHGs are the building blocks of organisation of the rural poor.
- Self Help Groups (SHG) is also a platform to act and discuss on other issues such as domestic violence, health, nutrition etc.
