The correct option is 1 and 3 only.
Explanation
Self-Help Groups (SHGs) are small, informal associations of people, typically from similar socio-economic backgrounds, who come together to solve common problems through mutual help. They function as village-based financial intermediaries, operating on the core principles of thrift (savings) and credit.
Statement-wise Analysis:
- Statement 1 is Correct: The formal banking system often finds it difficult to lend to the rural poor due to the absence of collateral and high transaction costs. SHGs fill this gap in the formal credit system by utilizing "social collateral" (mutual trust and peer pressure) to ensure repayment, thereby enabling the poor to access funds without physical assets.
- Statement 2 is Incorrect: The foundational principle of an SHG is the pooling of resources through regular savings by its members. Lending activities begin by using this internal corpus (savings) to provide small loans to members. External credit (Bank Linkage) is generally provided only after the group has successfully demonstrated financial discipline through the management of its own savings. Thus, member savings are a mandatory prerequisite.
- Statement 3 is Correct: SHGs are instrumental in empowering women by providing them with financial independence and decision-making power within the household. Furthermore, the group mechanism offers a platform for women to address social issues, fostering leadership and collective action.
Key Takeaway:
Self-Help Groups operate on a "savings-first" model where member contributions create the initial capital for lending. They serve as a critical bridge between the unbanked poor and the formal financial system, primarily driving financial inclusion and women's empowerment.