Mains- Answer writing practice: SHG #166

Mains- Answer writing practice: SHG #166

What are SHGs and explain their role in poverty alleviation in India? (200 words)

Model answer

Self-Help Group (SHG) is a small voluntary association of poor people, preferably from the same socioeconomic background, who come together for the purpose of solving their common problems through self-help and mutual help.

SHGs and poverty alleviation
Access to credit: SHGs pool their savings through the group and re-lend that pooled fund to the needy members on low interest rates. Thereby, preventing poor people from the clutches of informal indebtedness owing to lack of institutional credit.
Increase saving tendencies: SHGs use the pooled fund for both productive as well as consumptive purposes. Thereby, reducing the burden of any exigencies which tend to shift people below the poverty line.
Promotion of enterprises: One of its objectives is to promote entrepreneurship among poor through credit support and hand-holding in product development, marketing etc.
Increase in incomes especially of women: SHG model has been real game changer for rural women mobilising about 46 million of them. Studies have shown that the income of female workers raises the standard of living of their households to a greater extent than their male counterparts.
Capacity Building: SHGs has important role in enhancing human capital through training, workshop, imparting skills etc. which further aids in reduction of poverty.
SHG-Bank linkage (SBL) programme was started by NABARD in 1992 to link SHGs to formal banking system. Under this, banks provide loans to the SHGs and the quantum of loan could be several times the deposits placed by such SHGs with the banks.

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