Question : Statement 1: Institutional sources of credit offer lower interest rates compared to informal sources.
Statement 2: Institutional sources of credit provide farmers with financial counseling and guidance.
Option 1: Both statement 1 and statement 2 are true.
Option 2: Both statement 1 and statement 2 are false.
Option 3: Statement 1 is true, but statement 2 is false.
Option 4: Statement 1 is false, but statement 2 is true.
Correct Answer:
Both statement 1 and statement 2 are true.
Solution : The correct answer is (a) Both statement 1 and statement 2 are true.
Institutional sources of credit do offer lower interest rates compared to informal sources. This is because institutional sources, such as banks and cooperatives, have a more regulated and structured approach to lending, which allows them to offer loans at competitive interest rates. Informal sources, on the other hand, may charge higher interest rates due to their higher risk and lack of regulatory oversight.
Additionally, institutional sources of credit provide farmers with financial counseling and guidance. They often have dedicated staff or departments that help farmers understand their financial needs, evaluate loan options, and provide advice on financial management. This guidance can be valuable for farmers in making informed decisions about their borrowing and financial planning.
Therefore, both statements 1 and 2 are true, as they accurately describe the characteristics and benefits of institutional sources of credit for farmers.
