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. 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.       [1]

Answer 1

1. 
   
   1. The credit facilities offered by cooperative societies fall under the rural and agricultural banking sector.
   2. These societies provide loans to farmers, weavers, small-scale industries, and self-employed individuals.
   3. They offer financial support for agriculture, housing, trade, and industrial purposes.
2. 1. Self-Help Groups (SHGs) collect savings from members and use them for small loans.
   2. They link with banks or microfinance institutions to obtain external funding.
   3. Banks provide loans to SHGs without collateral based on group savings and repayment history.
   4. Government and NGOs also support SHGs through subsidies and financial assistance programs.
3. 
   
   1. Cooperative societies are member-owned financial institutions.
   2. Members pool their savings to create a common fund.
   3. These savings act as collateral to obtain loans from banks.
   4. The co-operative provides loans to its members for:
      
      1. Agricultural activities (buying seeds, fertilizers, equipment)
      2. Small businesses and trade
      3. Housing construction
   5. Loan repayments allow continuous lending cycles.