(a) How are 'self-help groups' the building blocks of the rural poor? Explain with examples. 1 × 5=5

(i) Rural people create Self-Help Groups (SHGs).

(ii) SHGs are small groups of poor people which promote small savings among their members.

(iii) A typical SHG has about $\displaystyle 15$–$\displaystyle 20$ members.

(iv) It helps borrowers to overcome the problem of lack of collateral.

(v) People can get timely loans for a variety of purposes and at a reasonable interest rate.

(vi) It helps mainly women to become financially self-reliant.

(vii) The regular meetings of the group provide a platform to discuss and act on a variety of social issues such as health, nutrition, domestic violence, etc.

b) How does the credit vary substantially between formal and informal lenders? Explain with examples.

Formal lenders :

(i) Sources of formal lending are loans from banks and cooperatives.

(ii) The Reserve Bank of India supervises the functioning of formal sources of loans.

(iii)Charge low interest.

(iv) Collateral is must.

(v) Mainly taken by urban people.

Informal lenders :

(i) Sources of informal loans are moneylenders, traders, employers, relatives, friends, etc.

(ii) There is no organisation which supervises the credit activities in the informal sector.

(iii)High rate of interest.

(iv) Sometimes collateral is asked.

(v) Mainly taken by the rural people.