Sources of farm financing - SS1 Agriculture Past Questions and Answers - page 2
What is the primary advantage of borrowing from commercial banks for farm financing?
Lower interest rates
No need for formal documentation
Higher flexibility in repayment
Community support
Which source of farm financing focuses on promoting knowledge-sharing among farmers?
Individuals
Commercial banks
Cooperative societies
Agricultural banks
What should farmers be cautious about when borrowing from money lenders?
Flexible repayment options
Clear documentation
Low-interest rates
Higher interest rates
Which source of farm financing provides the most flexibility in loan terms and repayment schedules?
Commercial banks
Cooperative societies
Individuals
Agricultural banks
What should farmers consider when choosing a source of farm financing?
Only the interest rates offered
Their specific financial needs and the advantages of each source
The proximity of the financing source to their farm
The size of their farm
Describe the primary functions of agricultural banks in providing farm financing.
Agricultural banks primarily serve the agricultural sector by providing financial services and farm financing. Their functions include offering various types of loans such as crop loans, farm equipment loans, and long-term agricultural development loans. They often have government affiliations and offer tailored financial products to support the growth and modernization of agriculture. Additionally, agricultural banks may promote financial literacy and provide technical assistance to farmers.
What are the key advantages and disadvantages of borrowing from money lenders for farm financing?
Advantages of borrowing from money lenders include quick access to funds, less stringent credit requirements, and flexibility in loan terms. However, disadvantages include higher interest rates compared to formal financial institutions, potential lack of legal protection, and the risk of exploitative lending practices. Borrowers should exercise caution and ensure clear terms and documentation.
How do cooperative societies contribute to the development of the agricultural sector, besides offering farm financing?
Cooperative societies play a vital role in the agricultural sector by fostering collaboration among farmers. In addition to providing farm financing, they promote knowledge-sharing, collective marketing of agricultural products, and group purchasing of inputs, which can lead to cost savings. Cooperative societies also act as a platform for farmers to address common challenges and collectively negotiate better deals, ultimately contributing to the overall development of agriculture.
Explain the concept of collective savings and contributions in the context of cooperative societies' role in farm financing
When considering borrowing from individuals, farmers should assess several factors. These include the terms of the loan, interest rates, repayment schedule, the relationship with the lender, and the impact of the loan on personal and farm finances. Farmers should also ensure that all agreements are documented clearly and legally to avoid potential disputes in the future. Additionally, it's essential to evaluate whether the loan aligns with the specific needs and goals of the farm.