Knowledge Hub

Savings

Savings means setting aside a portion of your income or money instead of spending it all. It's the money you do not use immediately, but keep for future needs or emergencies.

In Simple Terms:
Income – Expenses = Savings

Why Do People Save?

• For emergencies (e.g., medical, job loss)
• To buy something in future (e.g., house, car, education)
• For retirement
• To achieve goals (like starting a business or going on a trip)

Where Can You Keep Your Savings?

• Savings Account in a Bank
• Recurring Deposit (RD) or Fixed Deposit (FD)
• Piggy Bank or Cash at Home (less safe)
• Post Office Schemes
• SHG Group Savings

Benefits of Saving:

• Provides financial security
• Reduces stress during emergencies
• Helps in planning for the future
• Builds financial discipline

Would you like examples of how SHG members or low-income families can start saving with small amounts?

Investment

Investment means using your money to buy something that can grow in value or give you more money in the future.

In Simple Terms:
Instead of keeping your money idle, you put it to work—so it can earn more money over time.

Example:

• You buy a goat for ₹4,000 → It gives milk or has kids → You earn ₹6,000 in 6 months → That’s an investment.
• You put ₹5,000 in a Fixed Deposit → Bank gives you interest → You get ₹5,500 after a year → That’s also an investment.

Common Types of Investments:

Type	What You Get
Bank FD/RD	Fixed interest
Gold or Silver	Value increases over time
Land/Property	Price may rise over years
Shares/Stocks	Part-ownership in a company, can grow in value
Mutual Funds	Combined investment in many shares/bonds
SHG Business Loans	Earn profit from business

Difference Between Saving and Investment:

Saving	Investment
Safe, low return	Higher return, but more risk
Good for short-term goals	Good for long-term goals
Easily available (like cash)	Takes time to grow or sell

Why Invest?

• To grow your wealth
• To beat inflation (price rise)
• To achieve long-term goals (education, business, house)
• To become financially independent

Would you like help choosing an investment option based on your income or goals?

Loan

Loan means borrowing money from someone (like a bank, SHG, or person) with the promise to pay it back later, usually with interest.

In Simple Terms:
You take money now → Use it for a purpose (like business, health, education) → Pay back in small parts (EMI or installments) over time.

Key Parts of a Loan:

Term	Meaning
Principal	The actual amount you borrow
Interest	Extra money you pay for using the loan
Installment (EMI)	Monthly repayment amount
Tenure	Time period to repay the loan

Types of Loans:

Term	Meaning
Personal Loan	Any personal need or emergency
Business Loan	For shop, farming, or small business
Home Loan	To build or buy a house
Education Loan	For school or college fees
Gold Loan	Loan taken by pledging gold
SHG Loan	Taken by members for group work or personal needs

Example:

• You borrow ₹10,000 from SHG at 12% interest.
• You repay ₹1,056 every month for 10 months.
• That’s a loan with installment and interest.

Why Take a Loan?

• To start or grow a business
• For education, medical, or marriage
• To handle emergencies
• For buying tools, animals, seeds, etc.

Important:

• Always take a loan only when needed
• Make sure you can repay on time
• Read or understand the loan terms carefully

Would you like a sample format of a simple loan agreement or repayment plan?

Insurance

Insurance is a way to protect yourself or your family from big financial loss in case something bad happens—like illness, accident, death, theft, or damage.

In Simple Terms:
You pay a small amount regularly (called premium) to an insurance company. If something goes wrong, the company gives you or your family money (called a claim or coverage).

Key Words:

Term	Meaning
Premium	The amount you pay (monthly/yearly) for insurance
Coverage	The protection or money you get when something happens
Policy	The written agreement between you and the insurer
Claim	The request to get the money when the incident happens

Types of Insurance:

Term	Meaning
Life Insurance	If the policyholder dies, family gets money
Health Insurance	Hospital or medical expenses
Crop Insurance	Loss of crops due to drought, flood, pests, etc.
Livestock Insurance	Death of cows, goats, etc.
Vehicle Insurance	Damage to vehicles or accidents
Accident Insurance	Injury or death due to accident

Example:

• You pay ₹500/year for Livestock Insurance for your cow.
• If the cow dies, you get ₹20,000 from the insurance company.
• That saves you from a big financial loss.

Why is Insurance Important?

• Gives financial support during emergencies
• Helps families stay stable after a loss
• Encourages planning and protection
• Builds confidence in agriculture, health, and business

Would you like help selecting a low-cost insurance scheme or SHG-friendly option (like PM-Jeevan Jyoti or PM-Fasal Bima Yojana)?

What is a Credit Score?

A credit score is a 3-digit number (usually between 300 to 900) that shows how well a person repays loans or manages credit. It is like a financial report card.

Why Is It Important?

Banks, NBFCs, MFIs, and even SHGs sometimes check your credit score before giving you a loan or credit card. A higher score = better chances of getting a loan.

What Is a Good Credit Score?

Credit Score	Meaning
750 – 900	Excellent – Easy to get loans at low interest
650 – 749	Good – Usually loan approved
550 – 649	Average – May face some difficulty
Below 550	Poor – Risky borrower

How Is It Calculated?

Factor	Impact (%)
Repayment History	35% – Paying on time
Credit Usage	30% – How much of the loan/credit limit you use
Length of Credit History	15% – How long you’ve had loans/credit
Type of Credit	10% – Personal, home, gold, etc.
New Credit Inquiries	10% – Recent loan/credit applications

Who Gives You a Credit Score?

Credit bureaus like:

• CIBIL (Most popular in India)
• Equifax
• Experian
• CRIF Highmark

How to Improve Your Credit Score?

• Pay EMIs and credit card bills on time
• Avoid taking too many loans at once
• Use credit wisely (not full limit)
• Don’t default on loans
• Keep old accounts active if healthy

How to Check Credit Score?

You can check your CIBIL score for free once a year from:
Some banks and mobile apps

Would you like help writing a loan application that mentions a strong credit score, or steps to rebuild a low one?

Micro Economy in India

Microeconomy (or Microeconomics) is the study of individuals, households, small businesses, and small-scale economic units—how they earn, spend, save, invest, and make decisions. In India, microeconomy plays a major role because a large part of the population is involved in small-scale activities.

Key Features of India's Micro Economy:

1. Small-Scale Businesses & Enterprises

• Examples: Tailors, shopkeepers, street vendors, artisans, cottage industries.
• They form a major part of India's informal economy.
• Supported by MSMEs (Micro, Small and Medium Enterprises).

2. Self-Help Groups (SHGs)

• Groups of 10–20 people, mostly women, who save and lend money within the group.
• Support micro-enterprises, livelihoods, and women empowerment.
• Linked with banks for micro-credit and government schemes.

3. Rural & Informal Sector

• Small farmers, daily-wage laborers, small traders.
• Contribute significantly to employment, but often lack formal support systems like social security or insurance.

4. Microfinance Institutions (MFIs)

• Provide small loans (microloans) without collateral to the poor or low-income individuals.
• Enable people to start or grow tiny businesses.

5. Government Schemes Supporting Micro Economy

Scheme Name	Purpose
PMEGP (Prime Minister's Employment Generation Programme)	For micro-enterprise setup
MUDRA Loan	Loan to small traders, vendors, SHGs
DAY-NRLM	Supports SHGs, especially rural women
Startup India / Stand-Up India	Promotes entrepreneurship

Why the Micro Economy Is Important in India ?

• Creates employment at the grassroots level
• Reduces poverty and improves livelihoods
• Encourages entrepreneurship
• Supports financial inclusion
• Plays a crucial role in rural development

Challenges of India’s Micro Economy:

• Limited access to formal credit
• Low financial literacy
• Lack of technology and infrastructure
• Market access issues
• Vulnerable to climate, health, and economic shocks

Way Forward:

• Strengthening SHGs and MFIs
• Digital inclusion and mobile banking
• Skill development and training
• Better access to markets and government support

Would you like a small case study or success story of a SHG or micro-entrepreneur from India?