Question

Read the following source and answer the questions that follow:

Loans from Co-operatives             Besides banks, the other major source of cheap credit in rural areas are the co-operative societies. Members of a co-operative pool their resources for co-operation in certain areas. There are several types of co-operatives possible such as farmers co-operatives, weavers co-operatives, industrial workers co-operatives, etc.            Krishak co-operative functions in a village not very far away from Sonpur. It has 2300 farmers as members. It accepts deposits from its members. With these deposits as collateral, the co-operative has obtained a large loan from the bank. These funds are used to provide loans to members. Once these loans are repaid, another round of lending can take place.            Krishak co-operative provides loans for the purchase of agricultural equipments, loans for cultivation and agricultural trade, fishery loans, loans for construction of houses and for a variety of other expenses.

1. Which sector includes credit facilities offered by co-operative societies?   [1]
2. How do Self-Help Groups access external funding?    [1]
3. Explain the functioning of co-operative societies.   [2]

Answer 1

1. The credit facilities offered by co-operative societies cater to various needs, such as agriculture, construction of houses, and fishery.
2. Members of a co-operative society access external funding by pooling their individual resources and using these collective deposits as collateral to secure larger, formal loans from banks.
3. Co-operative societies function based on the principle of mutual help and collective effort:
   1. Resource Pooling: Members pool their savings to create a common fund, which is used to help those in need within the group.
   2. Affordable Credit: They provide loans to their members at fair and low interest rates, which ensures their economic welfare and protects them from exploitation by informal moneylenders.
   3. Social Benefit: By working collectively, these societies aim to improve the overall social and financial status of their members.