Micro credit or micro finance is a novel approach to bank with poor. In this approach bank credit is extended to the poor through _________.

Question

Question

This question was previously asked in

SSC CGL 2023 Tier-I Official Paper (Held On: 19 Jul 2023 Shift 4)

Answer 1

The correct answer is self-help groups.

Key Points

Microfinance or microcredit refers to the provision of financial services, including loans, savings, insurance, and training to people living in poverty.
These services are typically targeted at underserved populations who do not have access to typical banking services. The approach is designed to support entrepreneurship, empower poor individuals, and stimulate economic growth.
In this mode of operation, bank credit is extended to the poor through Self Help Groups (SHGs), which are small voluntary associations of poor people created for the purpose of solving their common problems.
SHGs usually consist of 10-20 individuals from a homogeneous class who come together to pool their resources to cope with emergencies, provide collateral-free loans to members, and often serve as a conduit for formal banking services.
This approach has proven successful in reaching large numbers of poor individuals, particularly women, and allowing them to partake in income-generating activities.