Microcredit

Microcredit Meaning and Importance: Microcredit refers to the credit and other financial services provided to the poor through self-help groups (SHGs) and non-governmental organizations (NGOs). SHGs play a crucial role in meeting the credit requirements of the rural poor by inculcating in them the habit of saving. The individual savings of many farmers are pooled together to meet the financial requirements of the needy members of SHGs.

The members of these groups are linked with the rural banks. A poor individual, thus, becomes financially strengthened by being part of an SHG. Further, the financing made through SHGs reduces transaction costs for both lenders and borrowers. Presently, over 6.6 million SHGs are operating in different rural areas. SHGs are becoming popular among the small and marginal borrowers owing to their informal credit delivery mechanism and minimal legal formalities.


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