Social Science (087) — AI-generated practice question

Rural women often lack collateral, which is a key requirement for bank loans, making it difficult for them to access formal credit individually.

The Self Help Group (SHG) model overcomes this barrier by organising 15–20 women from a neighbourhood to pool their savings regularly. After a year or two of regular savings, the group becomes eligible for a bank loan sanctioned in the group's name, so individual collateral is not required.

Members themselves take most important decisions — regarding the purpose, amount, interest rate, and repayment schedule of loans. If any member defaults, the other members follow it up seriously, making the group collectively responsible for repayment. This peer accountability convinces banks to lend to SHGs even without collateral.

Source: Chapter 3 — Self-Help Groups for the Poor

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• 3 marks = 3 clear points: (1) the problem (no collateral), (2) how SHG solves it (pooling savings → group loan), (3) members' role (decision-making + collective repayment responsibility).
• Examiners look for the terms collateral, pool savings, and group decisions/repayment — use them explicitly.
• Don't over-explain the savings amounts or SHG social functions; keep focus on the two parts the question asks: barrier overcome + members' role in managing funds.