Question

How can formal sector loans be made beneficial for poor farmer and workers ? Give five points.

Answer 1

People obtained loans from various sources.
The various sources of loans categories into
(i) Formal sector loan
(ii) Informal sector loan
The formal sector loans are given by banks and cooperatives. The informal lenders include money lenders, traders, employers, relatives friends etc.
Poor people and workers get much of their loans from the informal sectors, which is not only exploitative but also charges very high interest rate. These make the poor people and worker to fall back in poverty.
The measurer to make formal sector loan beneficialfor poor formers and workers are
(i) The formal sector like Banks and cooperatives should lend more to poor people and worker, particularly in rural areas.
(ii) The formal sector should provide cheap and affordable credit.
(iii)The formal sector should ensure that every one receives loans.
(iv)Providing Self Help Group Bank Linkage.
(v) There should be more number of cooperatives and banks in rural areas.

Answer 2

1. Their is a need to increase the lending activities of the formal sector in rural areas, to reduce the dependence on the informal sector of credits.

2. Informal sources like Moneylender, charges a high interest rate whereas bank charges less interest rate on loans taken, so it increase the income of borrowers.

3. Their is also a necessary need to distribute the loans from formal sector equally to the poor people.

4. Their is a need to set up banks to several places in rural areas, so that poor farmers can borrow at cheap rate.

5. Their is a need that large share of these loans also given to poor farmers and workers to set up their own business and small scale industries.