Advertisements
Advertisements
Question
Explain the role of microcredit in meeting credit requirements of the poor.
Advertisements
Solution 1
Microcredit refers to the provision of small loans and financial services to poor households through Self Help Groups (SHGs) and NGOs. Microcredit plays an important role in meeting the credit needs of the poor by encouraging saving habits and pooling small individual savings. SHGs provide loans to needy members without any collateral, making credit easily accessible to people who are normally denied loans by banks. SHGs also link poor households with banks, helping them obtain larger loans at low interest rates. Microcredit reduces dependence on moneylenders and enables poor families to start small income-generating activities, thereby improving their livelihood and reducing poverty.
Solution 2
The microcredit system helps in meeting the credit requirements of the poor in the following ways:
- Self Help Groups (SHGs): Self-help groups encourage rural households to practice small-scale saving. Small funds are mobilized and made available as credit to various members.
- No mortgage: Members, unlike banks, make loans with no collateral. Banks require mortgages before giving loans, which impoverished people cannot pay. However, SHGs do not function like banks and do not give credit without security.
- Moderate rate of interest: Banks impose high interest rates while making loans. However, SHGs offer a relatively low interest rate that poor people may afford.
APPEARS IN
RELATED QUESTIONS
Discuss the importance of credit in rural development.
Critically evaluate the role of the rural banking system in the process of rural development in India.
When was the National Bank for Agricultural and Rural Development set up?
Which of the following is an institutional source of rural credit?
Which source of credit had emerged to fully integrate the formal credit system into the overall rural social and community development?
______ is the apex body which coordinates the functioning of different financial institutions working for the expansion of rural credit.
The scheme of microfinance is extended through ______.
National Bank for Agricultural and Rural Development (NABARD) was set up in 1982 as a/the ____________ body to coordinate the activities of all institutions involved in the rural financing system.
Read the following statements carefully and choose the correct alternatives given below:
Statement 1 - The emergence of Self-Help Groups (SHG’s) ensured the reduction in the fissures of the formal credit system.
Statement 2 - The borrowings from SHGs are mainly confined to consumption purposes by their members.
Which is the apex institute at the national level which provides re-finance facilities to institutions engaged in providing rural credit?
What is the importance of self-help groups (SHGS) in rural areas?
What are the steps taken by the government in developing rural markets?
Identify which of the following is a source of non-institutional credit in the rural areas of India.
______ have emerged as an important micro finance system and led to women empowerment.
Micro credit programmes play a vital role in ensuring an overall development of the rural economy as they ______.
- provide financial support
- lead to women empowerment
- enhance the reach of formal credit system
State and elaborate whether the following statement is true or false, with valid arguments:
Jan-Dhan Yojana has been a crucial step for financial resource mobilization in the Indian economy.
