Question

Read the given 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 and 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. These activities represent the diverse range of financial support provided to members in rural areas.
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.