Ans. There is much dependence on informal sources of credit because of the following reasons:
There are not sufficient banks in rural India.
Even if the banks are present, due to lack of proper documents and collateral, obtaining a loan from the bank is very complicated.
Due to these specific problems, self-help groups (SHG) are created by the people of rural India. Small groups of poor people which encourage small savings among the members are termed as SHG. Generally, an SHG consists of 15-20 members.