Advantages of financing through SHGs
An economically poor individual gains strength as part of a group. Besides, financing through SHGs reduces transaction costs for both lenders and borrowers. While lenders have to handle only a triple SHG account instead of a large number of small-sized individual accounts, borrowers as part of an SHG minimise expenses on travel (to and from the branch and other places) for completing paper work and on the loss of workdays in canvassing for loans.
Where successful, SHGs have significantly empowered poor people, especially women, in rural areas. SHGs have helped immensely in reducing the influence of informal lenders in rural areas. Many big corporate houses are also promoting SHGs at many places in India. SHGs help borrowers overcome the problem of lack of collateral. Women can discuss their problem and find solutions for it.