How are cooperatives functioning in the rural areas to solve the problem of credit?

(i) Besides banks, the other major source of cheap credit in rural areas are the cooperatives.

(ii) Members of a cooperative, pool their resources for cooperation in certain areas.

(iii) Cooperatives form members, who accept deposits from its members. With these deposits as collateral, the cooperative obtains a large loan from the bank. These funds are used to provide loans to members. Once these loans are repaid, another round of lending can take place.