Self-help groups (SHGs) have emerged as a transformative force in uplifting marginalized communities, particularly in the rural heartlands of India. An increasing number of underprivileged women across various states are actively enrolling in SHGs, engaging in activities such as savings mobilization, credit access, income-generating ventures, and sustainable management of local resources. The savings and credit mechanism within an SHG forms its core foundation, providing members a degree of financial control and the ability to invest in productive opportunities. The SHG model has demonstrated remarkable effectiveness in fostering women's empowerment by gradually dismantling the cycle of dependence, exploitation, and social exclusion. According to NABARD, an SHG is defined as a compact, economically similar cluster of rural poor individuals who come together voluntarily to pool savings and contribute jointly to a shared fund, which is then disbursed as loans based on collective decision-making. Typically, a self-help group is a community-level financial institution comprising around 10 to 20 local women. Members begin by making small, consistent contributions over several months until sufficient capital accumulates within the group to commence internal lending. These pooled funds may then be made available to members or to other residents of the community for a variety of needs. Over the years, SHGs have grown into a widespread and effective pillar of both rural and urban development across India. Women come together, inspire one another, and collectively forge new pathways toward sustainable livelihoods. The majority of SHGs are established without any initial external funding, relying solely on the modest but regular contributions of their members. After sustaining a consistent savings record, these groups begin extending small internal loans for micro-entrepreneurial activities and essential expenditures. Only those groups that demonstrate responsible management of their own resources become eligible for external financial support through linkages with banks and other formal financial institutions.
Read the given passage carefully and answer the following questions. Certain parts have been highlighted to help answer the questions.
Which of the following statements is inconsistent with NABARD's definition of an SHG?
Correct Answer :
The pooled fund is utilized to fulfill a shared objective of its members.
Solution :
The correct answer is: The pooled fund is utilized to fulfill a shared objective of its members.
Step-by-step Explanation:
1. Analyze the Definition in the Passage:
According to the passage provided, NABARD defines a Self-Help Group (SHG) as "a compact, economically similar cluster of rural poor individuals who come together voluntarily to pool savings and contribute jointly to a shared fund, which is then disbursed as loans based on collective decision-making." Furthermore, the passage notes that "pooled funds may then be made available to members or to other residents of the community for a variety of needs."
2. Evaluate the Options:
• "Self-help groups are compact clusters that are economically similar in nature." — This is directly consistent with "a compact, economically similar cluster".
• "SHGs are composed of a unified group of rural individuals who participate on a voluntary basis." — This is directly consistent with "rural poor individuals who come together voluntarily".
• "Only the members of an SHG collectively determine to whom the pooled fund is to be disbursed as loans." — This matches "disbursed as loans based on collective decision-making" by its members.
• "The pooled fund is utilized to fulfill a shared objective of its members." — This statement is inconsistent with NABARD's definition because the pooled funds are disbursed as individual micro-loans to members or other community residents for a variety of diverse individual needs, rather than being used to fulfill a single "shared objective" of all members.
Therefore, the statement regarding fulfilling a shared objective is inconsistent with NABARD's definition presented in the passage.
Access expert-curated educational resources and study materials—completely free.
Create, conduct, and manage professional online assessments with Mindyard. Perfect for teachers and institutes.
Copyright © 2026 Mindyard. All Rights Reserved.
