Ask a Teacher

Explain with an example, how credit plays a vital and positive role for development.

Growth of rural economy depends primarily on the infusion of capital from time to time. It requires rural credit. Rural credit helps the farmers in the following ways:

1. helps them to attain higher higher productivity in agriculture and non-agriculture sector.

2.  In agriculture, there is a time gap (gestation period) between sowing seeds and relalisation of income from the product produced. Framers borrow not only to meet their farm expenses but also for their day-to-day consumption expenditure.

3.To ensure welfare of farmers there should be easy availability of credit at a low rate of interest and longer repayment period.

4. Availability of rural credit at low  rate of interest helps the farmers from the exploitation of village money lenders.

5. Availability of rural credit helps  the farmers to take up innovative ideas in the field of agriculture production and product diversification.

6. with the availability of credit and enhanced production, rural farmers can become self-sufficient. This leads to the development of rural economy.