Q1. [4] medium exam-ready
[case_study] Read the following and answer the questions:
In a village near Sonpur, a group of 18 women have formed a Self Help Group. They meet every month, pool their savings, and have been doing so regularly for over a year. The group recently applied for a bank loan and the bank sanctioned a loan in the group's name. The members plan to use the funds to buy sewing machines, purchase raw materials, and release mortgaged land. All decisions about how loans are given to members and how repayments are tracked are made collectively by the members themselves.
(i) Why was the bank willing to sanction a loan to the group even though individual women had no collateral to offer? (1 mark)
(ii) Name any two productive activities for which the SHG members plan to use the loan. (1 mark)
(iii) How does the collective functioning of an SHG help its members in ways that go beyond access to credit? Explain with two points. (2 marks)
Generated by claude-sonnet-4-6 · 2026-06-26 13:24 · grounding rag
Model Answer
(i) The bank was willing to sanction the loan because in an SHG, the group itself is responsible for repayment. If any member fails to repay, the other members follow it up seriously. This collective responsibility acts as a substitute for collateral.
(ii) Two productive activities:
- Buying sewing machines (acquiring assets)
- Purchasing raw materials for work
(iii) Beyond credit, SHGs help members in two ways:
- Financial self-reliance: SHGs help women become economically independent by providing small loans at reasonable interest rates, reducing dependence on moneylenders.
- Platform for social issues: Regular group meetings provide a platform to discuss and act on social issues such as health, nutrition, and domestic violence, empowering women beyond just finances.
Source: Chapter 3 — Money and Credit, Self-Help Groups for the Poor
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Explanation
- (i) Key phrase examiners look for: "group is responsible for repayment" / "collective guarantee replaces collateral." One line is enough for 1 mark.
- (ii) Pick any two from the passage: sewing machines, raw materials, releasing mortgaged land. Don't over-explain — it's 1 mark.
- (iii) Two distinct points needed for 2 marks. Always include both the financial empowerment angle and the social issues platform angle — the passage explicitly mentions health, nutrition, domestic violence. Examiners expect these specific examples.