Self Help Groups

• Banks are not present everywhere in rural India.

• Even if they are present, getting loan from a bank is much more difficult than taking loan from informal sources.

• Bank requires proper documents and collateral which makes it difficult for poor people to take loan from formal sector.

• Moneylenders knows the borrowers personally and are willing to give a loan without collateral. But they charge very high rate of interest, keep no record of the transactions and harass poor borrowers.

• Therefore, to reach to poor people in the rural areas ,there is a need to think of other ways.

Functions of the Self -Group

• The idea is to organize rural poor, in particular women, into small help groups (SHG) and pool (collect) their savings.

• Usually a self help group have 15-20 members who meet and save regularly.

• Saving per member varies from Rs. 25 to Rs. 100 or more, depending on the ability of the people to save.

• Members can take small loans from the group on which low rate of interest is charged.

• They meet regularly and important decisions regrding the savings and loan activities are taken by the group.

• The group decides as regards the loans to be granted- the purpose, amount, interest to be charged, repayment schedule etc.

• After a year or two, if the group is regular in savings, it becomes eligible for availing loan from the bank. Loan sanctioned in the name of group.

• Not only women become financially self-reliant, but because of self- group they can discuss and act on a variety of social issues.

Grammeen Bank of Bangladesh

• Biggest success stories in reaching the poor to meet their credit needs.

• Sarted in 1970s as a small project

• Almost all the borrowers are women and belong to poor sections of the society.

• Professor Muhammad Yunus is the founder and receipent of 2006 Nobel Prize for Peace.