Money acts as a medium of exchange in transactions. Credit refers to an agreement where a lender provides money, goods, or services to a borrower who promises future payment. Farmers and poor people often rely on credit to purchase necessities, but typically access higher interest informal sources like moneylenders rather than formal banks. Self-help groups help address this by forming small collectives of individuals, usually women, who pool savings and can access loans at lower interest rates.

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3. money acts as
an
intermediate in
the exchange
process,
it is called a
medium of
exchange.
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11. CREDIT
• Credit (loan) refers to an
agreement in which the lender
supplies the borrower with
money, goods or services in
return for the promise of future
payment.
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12. • Collateral security
• Documentation required
• Term of the loan
• Mode of repayment
• Rate of interest
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14. IMPORTANCE OF CREDIT FOR FARMERS IN RURAL
AREAS
• Farmers need credit to buy seeds, fertilizers
pesticides, electricity, equipments, etc.
• There is a minimum period of three to four
months between the time when the farmers
buy these inputs and when they sell the crop.
• Farmers usually take crop loans at the
beginning of the season and repay the loan
after harvest.
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15. FORMAL SOURCES OF CREDIT
• Commercial Banks, co-operative societies and
Regional Rural Banks constitute the formal
sector of credit
• The Reserve Bank of India supervises the
functioning of formal sources of loans.
• They collect low rate of interest.
• They follow some well defined rules and
procedures
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16. INFORMAL SOURCES OF CREDIT
• The informal lenders include moneylenders,
traders, employers, relatives and friends, etc.
• There is no organisation which supervises the
credit activities of lenders in the informal
sector.
• They collect high rate of interest
• They do not follow any rules or procedures
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18. CREDIT IN URBAN AREAS
• Poor takes 85% credit from informal sources
and only 18% from banks and other formal
sources
• Rich takes more than 90% of loans from
formal sources
• So formal sources mostly serve the rich people
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19. WHY ARE THE BANKS NOT ADVANCING
LOANS TO THE POOR PEOPLE?
• Poor takes 85% credit from informal sources
and only 18% from banks and other formal
sources
Rich takes more than 90% of loans from
formal sources
So formal sources mostly serve the rich people
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20. SELF HELP GROUP
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21. SELF HELP GROUP
• A SHG has 15-20 members, mostly women of a
neighborhood
• Each member contributes some money
• Members can get small amounts as loans from the
group. Rate of interest is low and it is decided by
the members.
• After 2 years the group can get loans from the bank
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22. IMPORTANCE OF SHGs
• Members can get loans at low rate of interest.
• The group will encourage the members to find self
employment
• Members can discuss and act on many social issues
such as health, nutrition, domestic violence, etc.
• Banks will give loans to SHGs without any collateral
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