How did Self Help Groups fill the gap in the formal credit system in rural India?
Answer & explanation
Correct answer: option 3
The correct answer is option 3: Each member contributed and formed a pool of money
Self Help Groups (SHGs) in rural India address gaps in the formal credit system by pooling together resources from their members. Each member contributes to a common fund, which is then used to provide loans to members for various needs. This approach helps overcome issues such as limited access to formal credit, high-interest rates, and lack of collateral, offering an alternative means of financial support and fostering financial inclusion.