Money and Credit
Q20. Inspite of so many disadvantages people in rural areas are still more dependent on informal sources of credit. Give reasons.
Ans. 1. Banks are not present everywhere in rural India.
2.Even when they are present, getting a loan from a bank is much more difficult than taking a loan from informal sources.
3. bank loans require proper documents and collateral. Absence of collateral is one of the major reasons which prevents the poor from getting bank loans.
4. Informal lenders such as moneylenders, on the other hand, know the borrowers personally and
hence are often willing to give a loan without collateral.
5. The borrowers can, if necessary, approach the moneylenders even without repaying their earlier loans which is not possible in case of formal sector loan.
Q21. What is the main idea behind SHG. Write any four features of SHGs ?
Ans. The idea behind SHGs is to organise rural poor, in particular women, into small Self Help Groups and pool their savings.
2. A typical SHG has 15-20 members , usually belonging to one neighborhood, who meet and save regularly.
3. Savings per member varies from Rs. 25 to Rs. 100 or more.
4. Members can take small loans from the group itself to meet their needs.
5. The group charges interest on these loans but this is still less than what the money lender charges.
Q22. How is the work of SHGs administered ?
Ans. Most of the important decisions regarding the savings and loan activities are taken by the group
members.
2. The group decides as regards the loans to be granted — the purpose, amount, interest to be charged, repayment schedule etc.
3. Also, it is the group which is responsible for the repayment of the loan. Any case of nonrepayment
of loan by any one member is followed up seriously by other members in the group.
Q23. What are the advantages of SHGs particularly to rural women ?
Ans. banks are willing to lend to the poor women when organised in SHGs, even though they
have no collateral.
2. The SHGs help borrowers overcome the problem of lack of collateral. They can get timely loans
for a variety of purposes and at a reasonable interest rate.
3. SHGs are the building blocks of organisation of the rural poor. Not only does it help women to become financially self-reliant.
4. The regular meetings of the group provide a platform to discuss and act on a variety of social issues such as health, nutrition, domestic violence, etc.
Q24. Exlain the role played by the GBBS in meeting the credit needs of the poor ?
Ans. Grameen Bank of Bangladesh is started in the 1970s as a small project, Grameen Bank in October 2014 has over 8.63 million members in about 81,390 villages spread across Bangladesh. Almost all of the borrowers are women and belong to poorest sections of the society. These borrowers have proved that not only are poor women reliable borrowers, but that they can start and run a variety of small income-generating activities successfully.
Q25. Who is the founder of GBB ?
Ans. Professor Muhammad Yunus, is the founder of Grameen Bank, and recipient of 2006 Nobel Prize for Peace.
Q26. Differentiate between formal and informal sources of credit ?
Ans. Formal Sources
1. They follow those sources of credit which are registered by the government and have to follow its rules and regulations.
2. RBI supervises the functioning of formal sources of credit.
3. They generally charges the lower rate of interest.
4. Their main motive is social welfare.
5. For eg. - Banks and Cooperatives.
Informal Sources of Credit
1. This include those small and scattered units which are largely outside the control of the government.
2. There is no organisation which supervises the credit activities.
3. They charge much higher rate of interest.
4. Their main motive is profit making.
5. For eg. traders , moneylenders , relatives etc.
Q20. Inspite of so many disadvantages people in rural areas are still more dependent on informal sources of credit. Give reasons.
Ans. 1. Banks are not present everywhere in rural India.
2.Even when they are present, getting a loan from a bank is much more difficult than taking a loan from informal sources.
3. bank loans require proper documents and collateral. Absence of collateral is one of the major reasons which prevents the poor from getting bank loans.
4. Informal lenders such as moneylenders, on the other hand, know the borrowers personally and
hence are often willing to give a loan without collateral.
5. The borrowers can, if necessary, approach the moneylenders even without repaying their earlier loans which is not possible in case of formal sector loan.
Q21. What is the main idea behind SHG. Write any four features of SHGs ?
Ans. The idea behind SHGs is to organise rural poor, in particular women, into small Self Help Groups and pool their savings.
2. A typical SHG has 15-20 members , usually belonging to one neighborhood, who meet and save regularly.
3. Savings per member varies from Rs. 25 to Rs. 100 or more.
4. Members can take small loans from the group itself to meet their needs.
5. The group charges interest on these loans but this is still less than what the money lender charges.
Q22. How is the work of SHGs administered ?
Ans. Most of the important decisions regarding the savings and loan activities are taken by the group
members.
2. The group decides as regards the loans to be granted — the purpose, amount, interest to be charged, repayment schedule etc.
3. Also, it is the group which is responsible for the repayment of the loan. Any case of nonrepayment
of loan by any one member is followed up seriously by other members in the group.
Q23. What are the advantages of SHGs particularly to rural women ?
Ans. banks are willing to lend to the poor women when organised in SHGs, even though they
have no collateral.
2. The SHGs help borrowers overcome the problem of lack of collateral. They can get timely loans
for a variety of purposes and at a reasonable interest rate.
3. SHGs are the building blocks of organisation of the rural poor. Not only does it help women to become financially self-reliant.
4. The regular meetings of the group provide a platform to discuss and act on a variety of social issues such as health, nutrition, domestic violence, etc.
Q24. Exlain the role played by the GBBS in meeting the credit needs of the poor ?
Ans. Grameen Bank of Bangladesh is started in the 1970s as a small project, Grameen Bank in October 2014 has over 8.63 million members in about 81,390 villages spread across Bangladesh. Almost all of the borrowers are women and belong to poorest sections of the society. These borrowers have proved that not only are poor women reliable borrowers, but that they can start and run a variety of small income-generating activities successfully.
Q25. Who is the founder of GBB ?
Ans. Professor Muhammad Yunus, is the founder of Grameen Bank, and recipient of 2006 Nobel Prize for Peace.
Q26. Differentiate between formal and informal sources of credit ?
Ans. Formal Sources
1. They follow those sources of credit which are registered by the government and have to follow its rules and regulations.
2. RBI supervises the functioning of formal sources of credit.
3. They generally charges the lower rate of interest.
4. Their main motive is social welfare.
5. For eg. - Banks and Cooperatives.
Informal Sources of Credit
1. This include those small and scattered units which are largely outside the control of the government.
2. There is no organisation which supervises the credit activities.
3. They charge much higher rate of interest.
4. Their main motive is profit making.
5. For eg. traders , moneylenders , relatives etc.
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