Question

Read the given source and answer the questions that follow:

Loans from Cooperatives Besides banks, the other major source of cheap credit in rural areas are the cooperative societies (or cooperatives). Members of a cooperative pool their resources for cooperation in certain areas. There are several types of cooperatives possible, such as farmers cooperatives, weavers cooperatives, industrial workers cooperatives, etc. Krishak Cooperative 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 Cooperative 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 implements, loans for cultivation and agricultural trade, fishery loans, loans for construction of houses and for a variety of other expenses.

1. Cooperative societies come under which source of credit?   [1]
2. Mention any two sources of capital of cooperative societies.   [1]
3. Explain the role of cooperative societies in increasing the income of farmers.   [2]

Answer 1

1. Cooperative societies come under the formal source of credit as they are registered and regulated by government laws.
2. 
   
   • Deposits from members: Members pool their resources by contributing savings.
   • Loans from banks: Cooperatives use their pooled deposits as collateral to obtain larger loans from banks.
3. 
   
   • Providing affordable credit: Cooperative societies offer low-interest loans for agriculture, trade, and other activities, helping farmers reduce dependence on high-interest informal lenders.
   • Supporting agricultural growth: They provide funds for buying seeds, fertilizers, and equipment, enabling farmers to increase productivity and, in turn, their income.