How are cooperatives functioning in the rural areas to solve the problem of credit?
Answer:
- Besides banks, the other major source of cheap credit in rural areas are the cooperatives.
- Members of a cooperative, pool their resources for cooperation in certain areas.
- Cooperatives form members, who accept deposits from its members. With these deposits as collateral, the cooperative obtains 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.