Self Help Group
1. Main Reason the poor borrows from Informal Lender
As the poor do not have collateral to pledge they do not get bank loans
Advantages of Moneylenders: They usually know the borrower personally & hence are willing to give a loan without collateral
If necessary the borrower can go to the moneylender again to borrow more money before repaying the previous loan
Disadvantages: The moneylenders charge a very high rate of interest
They may use unfair means to get their money back
They keep no records of the transactions and harass the poor borrowers
2. SHG Working
A group of people from a neighborhood in rural areas especially women who come together to save money & solve common problems
A typical SHG has 15 - 20 members
They usually belong to a neighborhood & meet regularly & save money
Each member contributes Rs25 to Rs. 100 or more depending on their ability to save
Members can take small loans from the group
The group charges a low rate of interest
After a couple of years, when the group has regular savings, it becomes eligible to get loans from the bank
The members can take loans for repaying mortgage, buying seeds, fertilizers, sewing machine, cattle etc
3. SHG Management
All decisions regarding savings & loan activities are taken by the group members
The group decides who should be given loan, how much loan should be given, interest rate, mode of repayment etc
The group is responsible for repayment of loan
If a member is unable to pay a loan, the other members follow it up very seriously
So banks are willing to lend to poor rural women from SHGs eben without a collateral
4. Advantages of SHGs
The SHG members are able to borrow money without a collateral
They get timely loans at low rate of interest
It helps the women to be financially self reliant
They have regular meetings and they are able to discuss and find solutions to other social problems such as health, nutrition, domestic violence etc