A short explanation on SHGs

Self-help groups (SHGs) are small groups of people (especially from rural areas) who pool their resources and individual savings together. It is from this pool that loans are given to those members who are in urgent need of money. The loans provided by SHGs are at very nominal interest rates, which is lower than that charged by the informal sector. If the SHG functions well for over a year, then it becomes eligible for loans from banks. Such loans are then used for creating self-employment opportunities for the poor. It is with this bank loan that self-employment is created for the members of the group and their families, thereby increasing their standard of living. SHGs are working in rural India and have greatly helped in taking out poor farmers from debt-traps and helping them lead a life of dignity. Another remarkable success made by these groups is in making the Indian rural women self-reliant. Thus, with the help of SHGs, the rural poor become economically upgraded, and need not to be dependent on moneylenders anymore.