Social Science (087) — CBSE Class 10 board question

Role of Self Help Groups (SHGs) in the Rural Economy:

1. Overcomes lack of collateral: Poor borrowers cannot get bank loans due to absence of collateral. SHGs solve this by pooling savings and lending to members; the group itself acts as a guarantee.

1. Cheaper credit: SHGs charge lower interest rates than moneylenders, reducing the debt burden on the poor.

1. Access to bank loans: After regular savings for 1–2 years, the group becomes eligible for bank loans sanctioned in the group's name, creating self-employment opportunities.

1. Democratic decision-making: Members themselves decide the purpose, amount, interest rate, and repayment schedule of loans, ensuring accountability.

1. Financial self-reliance for women: SHGs particularly empower rural women to become economically independent.

1. Social platform: Regular meetings provide a forum to discuss issues like health, nutrition, and domestic violence, addressing broader social problems.

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

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• Examiners expect 5 distinct points for a 5-mark answer. Each point should be crisp, not elaborated into paragraphs.
• Always mention: collateral problem, cheaper interest, bank linkage, women's empowerment, and social issues — these are the key themes directly from the textbook passage.
• Avoid writing vague general statements; use specific details from the text (e.g., "15–20 members," "1–2 years") to show textbook accuracy.
• The "group responsibility" feature explaining why banks lend to SHGs despite no individual collateral is a favourite examiner point — don't skip it.