Question -
Answer -
Credit plays an important role in rural development. Farmers in rural areas have lower income and accordingly lower savings. Therefore, it results in less productivity. Banks also prefer paying loans to farmers having a good earning. Those farmers that are small or marginal take loan from moneylender and fall into a trap. Credit infusion is very much essential for agricultural sector in order to usher in rural development. The importance of credit can be shown below:
1. It helps modernize the farming by getting access to latest tools through credit
2. There exists a long time between sowing and harvesting. It is known as gestation period. In this period farmers need financial support for meeting requirements of farming like seeds,
3. It helps farmers from the poverty and provides funds for sustenance
4. Agriculture is dependent primarily on weather and season. During a bad season, there is a possibility of crop failure, which is detrimental to farmers. In that case, credit, crop insurance helps recover the cost.