Rehman is a poor agricultural labour and needs a loan for cultivation on his small piece of land.

Which of the following would DEFINITELY offer him a fair interest rate and flexible terms of credit?

A. village moneylender

B. cooperative society

C. commercial bank

D. rich landowner



So, the correct answer is (B): Cooperative Society


Let’s check all the options 

  • (A)Village Moneylender - If Rehman borrows money from the village moneylender, they will charge a high interest of rate which he will be unable to return at the time and the moneylender will exploit him.
    Thus, this option is incorrect.

  • (B)Cooperative Society - A cooperative society is a non-profit organization that seeks to support its members by providing fair and cheaper interest rates and flexible terms of credit. This is the formal channel through which poor farmers like Rehman can easily avail the loans.
    Thus, this option is correct .

  • (C)Commercial Bank - Commercial Banks are also a formal sector and provide a fair interest rate and flexible terms of credit but the procedure to apply for loans from the banks is long and required documentation and collateral that Rehman might not have.
    Thus, this option is incorrect.

    (D)Rich Landowner - Rich Landowner will use his power of money to exploit poor farmers like Rehman by charging higher rates of interest. Because of the high-interest rate, the amount that must be repaid may exceed the borrower's income. This might result in debt traps and rising debt levels.
    Thus, this option is incorrect.
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Davneet Singh

Davneet Singh has done his B.Tech from Indian Institute of Technology, Kanpur. He has been teaching from the past 14 years. He provides courses for Maths, Science, Social Science, Physics, Chemistry, Computer Science at Teachoo.