Statement I: The SHGs help borrowers overcome the problem of lack of collateral.

Question

Consider the statements given below and choose the correct answer 

Statement I: The SHGs help borrowers overcome the problem of lack of collateral. 

Statement II: They can get timely loans for a variety of purposes and at a high interest rate. 

a) Statement I is correct and Statement II is false. 

b) Statement I is false and Statement II is correct. 

c) Both Statements are incorrect 

d) Both Statements are correct 

Answer 1

Correct answer is (a) Statement I is correct and Statement II is false. 

Explanation: Self Help Groups (SHGs) are informal groups of 10-20 individuals, typically women, who come together to save money and provide loans to each other. SHGs can help borrowers overcome the problem of lack of collateral and can provide timely loans for a variety of purposes. This is because SHGs operate on a group liability model, where all members are responsible for repaying the loans taken by any individual member.