Question

Imagine you are a Village Development Officer of a village. Explain the usefulness of formal sources of credit for the farmers.

Hint:

Formal credit sources like banks and cooperatives offer affordable loans with legal protection, ensuring financial security for farmers.

Answer 1

1. Lower Interest Rates: Formal sources such as banks and cooperatives provide loans at lower interest rates compared to moneylenders.
2. Regulated and Transparent Process: Banks follow legal procedures, ensuring fair practices and protecting farmers from exploitation.
3. Long-Term Loans: Farmers can access long-term credit for purchasing equipment, seeds, and fertilizers, improving agricultural productivity.
4. Encourages Savings: Many banks provide savings accounts, helping farmers manage finances efficiently.
5. Government Subsidies and Support: Formal financial institutions often provide subsidies and special schemes for small and marginal farmers.