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Question
Mukesh took a loan from the local moneylender to meet his farming needs. Given the heavy rains, his crops failed but he was still bound to repay the loan at the agreed terms. To repay the loan, he took another loan from his friends. In the next year, he had normal crop but not enough to clear the debts.
How can the government help poor farmers in such a situation of debt trap?
Mukesh took a loan from the local moneylender to meet his farming needs. Given the heavy rains, his crops failed but he was still bound to repay the loan at the agreed terms. To repay the loan, he took another loan from his friends. In the next year, he had normal crop but not enough to clear the debts.
How can the government help poor farmers in such a situation of debt trap?
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Solution
The correct option is B By educating farmers to opt for formal credit sources
Most farmers are uneducated and are unaware of formal credit sources. Hence, they rely on informal sources like moneylenders, friends, and family. While these sources give credit without collateral, the interest rates are high and may not be easy to repay. Educating the rural population on formal sources and making it accessible would help to reduce their dependence on the informal sector.
Most farmers are uneducated and are unaware of formal credit sources. Hence, they rely on informal sources like moneylenders, friends, and family. While these sources give credit without collateral, the interest rates are high and may not be easy to repay. Educating the rural population on formal sources and making it accessible would help to reduce their dependence on the informal sector.
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