From where can small farmers get cheap loans?
Most of the formal sources of credit are cheap compared to the informal sources. Even though banks advance the loans with cheaper interest rate many farmers are not able to avail that loan due to terms of credit (formalities), therefore in cooperatives and Self Help Groups (SHGs) advance the loans with lesser formalities. The cooperatives and SHGs have lesser formalities because these are formed by the farmer groups itself, and they know who is actually in need of the loans. The cooperatives are voluntary organizations which include certain groups; they remove the problem by advancing the loan to the farmers with a low-interest rate. Self Help Groups (SHGs) is the small institution for the women to help themselves and make the women self-reliant, these small institutions may help to overcome the problem of farmers family.