Economics • Banking & FinanceMedium
How do Self-Help Groups (SHGs) linked with commercial banks and NABARD function as micro-financial intermediaries in rural Arunachal Pradesh?
A. By functioning as unregistered multinational hedge funds
B. By pooling member savings to provide internal loans and leveraging bank credit for income generation✓ Correct Answer
C. By collecting income tax returns on behalf of the central revenue department
D. By issuing commercial letters of credit for import-export trade
💡 Solution & Explanation
The Self-Help Group-Bank Linkage Programme empowers rural women and communities in Arunachal Pradesh by organizing them into savings groups that pool small periodic deposits, allowing members to access internal loans for urgent needs before graduating to collateral-free institutional bank credit for micro-enterprises. This model has proven exceptionally successful in promoting grassroots financial inclusion and women empowerment in hilly terrains. NABARD actively provides capacity-building grants for nurturing these groups. Micro-entrepreneurship in weaving and piggery is frequently funded through this channel.
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