"Self Help Groups" help borrowers to overcome the problem of lack of collateral. The system of working can be explained by "Self Help Groups" in the following ways :
(i) In a "Self Help Group" most of the important decisions regarding savings and loan activities are taken by the group members.
(ii) Group members are well known to each other. They belong to the same society.
(iii) Also, it is the group which is responsible for the repayment of the loan.
(iv) In case of non-repayment of loan by any member is followed up seriously by other members in the group.
(v) Due to this feature, banks are willing to lend to the poor woman. When organised in SHGS, even though they have no substantial collateral.