Self-Help Groups consist of certain members who pool their savings and constitute a fund which is further used in making finance and advances to other members. A typical Self-Help Group has 15 to 20 members. The members pool their savings and after some time, it becomes a large amount which is used to give loans to the needy ones at a very nominal rate of interest. This helps to reduce the functioning of informal sectors of credit.
After a year, if such a group is regular in its savings, it becomes eligible for availing loan from the bank. Loan is sanctioned in the name of the group and is meant to create self-employment opportunities for the members. Loans are provided for releasing mortgaged land, for meeting working capital needs as buying seeds, fertilisers, raw materials, for acquiring assets like sewing machine, handlooms, cattle, etc. Important decisions regarding the savings and loan activities are taken by the group members. The group decides the purpose, amount, interest to be charged, repayment schedule etc. Non-repayment is taken seriously. Because of this feature, banks are willing to lend loan especially to the poor women when organised in SHG.
SHGs are becoming popular for the following reasons:
(i) They help borrowers overcome the problem of lack of collateral.
(ii) They can get timely loans for variety of purposes and at a reasonable interest rate.
(iii) They are building blocks of the organisation of the rural poor.
(iv) It helps women to become self-reliant.
(v) The regular meetings of the group provide a platform to discuss and act on various social issues such as health, nutrition, domestic violence etc.
