How Do Self-Help Groups Help Borrowers to Overcome the Problem of Lack of Collateral? Explain With an Example.

This is a new idea to organize rural poor particularly women who pool their savings. Generally, this group has 15-20 members. Members belong to the neighbourhood so that they can meet and save regularly. Saving per member varies from ? 25 to ? 100 or more, depending on the economic condition of the member.

When the group is regular in saving for a year or two then the group is eligible for getting loan from the bank. Bank provide loan in the name of the group and then the SHG gives loan to its members at very low rate of interest.

Loan matter is taken very seriously, as if any one member is not able to repay the loan then it is followed by other members and because of this feature, they get loan from the bank even though they have no collateral.

Leave a Reply

Your email address will not be published. Required fields are marked *