Question

How do SHGs primarily benefit the rural poor with respect to informal credit sources?

Options

• They increase interest rates on loans

• They encourage borrowing only from moneylenders

• They help reduce dependence on moneylenders

• They merge with moneylenders to charge more

Answer 1

By pooling savings and lending to members, SHGs help reduce dependence on moneylenders. This protects the rural poor from the high interest rates and account manipulation associated with informal credit.