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How do Self Help Groups help borrowers to overcome the problem of lack of collateral? Explain. - Social Science

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Question

How do Self Help Groups help borrowers to overcome the problem of lack of collateral? Explain.

Answer in Brief

Solution

  1. People can get timely loans for a variety of purposes and at a reasonable interest rate.
  2. SHGs are regular in their savings which can be used as monetary help.
  3. Members can take small loans without collateral to meet their needs.
  4. Due to timely repayment banks also lend loans to SHGs.
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2021-2022 (April) Term 2 Sample

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Assertion (A): Banks are not ready to lend money to certain borrowers.

Reason (R): Some people do not have collateral.


Read the given source and answer the questions that follow:

Loans from Cooperatives

Besides banks, the other major source of cheap credit in rural areas are the cooperative societies (or cooperatives). Members of a cooperative pool their resources for cooperation in certain areas. There are several types of cooperatives possible such as farmers cooperatives, weavers cooperatives and industrial workers cooperatives, etc. Krishak Cooperative functions in a village not very far away from Sonpur. It has 2300 farmers as members. It accepts deposits from its members. With these deposits as collateral, the Cooperative has obtained a large loan from the bank. These funds are used to provide loans to members. Once these loans are repaid, another round of lending can take place.

Krishak Cooperative provides loans for the purchase of agricultural implements, loans for cultivation and agricultural trade, fishery loans, loans for construction of houses and for a variety of other expenses.

  1. 'Cooperative society' is an example of which source of 'credit'? (1)
  2. Explain the contribution of Cooperative Societies in rural development. (1)
  3. Mention any two sources of capital for Self-Help Groups. (2)

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