“Micro-credit is an aggregation of small transactions. As a result of this the transaction costs are high,” responds Dr. Amir Khan. “Thus, in order to meet costs as well as prevent losses due to defaults, banks oft en give loans to large farmers. This is the reason why, despite so much of money being doled out in agricultural credit, farmers continue to commit suicides,” he added. Dr. Khan recommends arguably that if banks were allowed to levy an interest rate of 50%, that would enable them to reach out to the needy and then “they would not have to seek loans from money lenders who charge 500% to 1000% in many cases.” SHGs are a loose association of individuals with minimum 6 members and are based on the principle of collective responsibility.
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Source:- IIPM-Business and Economy, Initiative:- Prof. Arindam Chaudhuri - 2006
