Page 85 - Understanding Economics for Class 10

the group itself to meet their needs. The group charges interest on these loans but this is
still less than what the moneylender charges. After a year or two, if the group is regular
in savings, it becomes eligible for availing loan from the bank. Loan is sanctioned in the
name; of the group and is meant to create self-employment opportunities for the members. For
Goyal Brothers Prakashan
instance, small loans are provided to the members for releasing mortgaged land, for meeting
working capital needs (e.g. buying seeds, fertilisers, raw materials like bamboo and cloth),
for housing materials, for acquiring assets like sewing machine, handlooms, cattle, etc.
(i) What is the purpose of organising rural poor, particularly women, into Self Help
Groups (SHGs) and pooling their savings?
Ans. The purpose of organising rural poor into SHGs and pooling their savings is to provide
them with access to loans and financial services, particularly for self-employment
opportunities and meeting their needs.
(ii) What are some examples of the purposes for which loans are provided to Self Help
Group members?
Ans. Loans provided to Self Help Group members are often used for activities such as
releasing mortgaged land, meeting working capital needs (e.g., buying seeds, fertilizers,
raw materials), acquiring housing materials, or acquiring assets like sewing machines,
handlooms, and cattle.
(iii) How does the formation of Self Help Groups and access to loans impact the socio-
economic conditions of rural poor, especially women?
Ans. The formation of Self Help Groups and access to loans can empower rural poor,
especially women, by providing them with financial resources, self-employment
opportunities, and a platform for collective decision-making. It can contribute to their
economic independence and improve their overall socio-economic conditions.

iv. very short answer type Questions

1. What is the main reason that prevents the poor from getting bank loans?
Ans. The main reason that prevents the poor from getting bank loans is the absence of collateral
(security).

2. Nitin is using his money to buy assets like house, commercial land and machines. Write
what is he actually doing?
Ans. He is investing his money with a hope of earning profits from these assets.

3. What is the meaning of ‘barter system’?
Ans. Barter system involves the exchange of goods, services, property, etc. for other goods, etc.
without using money.

4. Why do banks ask for collateral while giving credit to the borrower?
Ans. Banks ask for collateral while giving credit to the borrower because if the borrower fails
to repay the loan, the lender has the right to sell the asset or collateral to obtain payment.

5. What is meant by double coincidence of wants?
Ans. When both the parties in a barter system have to agree to sell and buy each other’s
commodities, without the need for a medium of exchange, such as money is called double
coincidence of wants.
E-76 Economics Class X