Question

Why do banks lend to the poor women organised in self-help groups (SHGs) even when they cannot provide any collateral against the loan?

• A. The entire SHG is responsible for the repayment of the loan.
• B. Women are trustworthy borrowers.
• C. SHGs want loans of a small amount.
• D. Women-led enterprises generate more profits.

Answer 1

The correct option is A The entire SHG is responsible for the repayment of the loan.

Banks enquire about the purpose of the loan and decide the amount, interest rate, repayment schedule, and anything else that is important. In case a member of a self-help group (SHG) does not pay the loan back, the other members of the group look into the matter and make sure that it is resolved. This feature of the SHGs is recognised by the banks and they provide loans to these SHGs. The SHGs can get timely loans for a variety of purposes and at reasonable interest rates. The loan from the bank is sanctioned in the name of the group.