Micro-credit System helps in meeting credit requirements of poor in following ways:
(i) Self Help Groups (SHGs): Self help groups promote habit of small saving among rural households. Small savings are mobilised and offered as credit to different members.
(ii) No mortgage: Members take loan without any collateral like banks. Banks take mortgage before granting loans which is not possible to afford for poor people. But SHGs don't act like banks and provide credit without security.
(iii) Moderate rate of interest: Banks charge high rate of interest while granting loans. But SHGs charge a very less rate of interest which poor people can afford.