Functions of a Credit Co-operative Society

A credit co-operative society performs a set of interrelated functions, all built around two activities — accepting savings and granting loans. Its functions may be grouped as follows.

• Accepting deposits and savings — It receives the savings of its members (and, in the case of larger urban societies, of the public) in the form of savings, recurring and fixed deposits, paying them a reasonable rate of interest. This is how it builds its fund and, at the same time, promotes the habit of thrift.
• Granting loans and advances — Out of the pooled fund it lends to needy members for productive purposes (cultivation, trade, small industry) and, within limits, for pressing personal needs (illness, education, marriage). Loans are given against surety, personal security or the pledge of goods.
• Charging a fair rate of interest — It lends at a moderate rate, well below the moneylender's, and keeps only a small margin between the interest it pays on deposits and the interest it charges on loans, so that credit stays cheap.
• Encouraging thrift and self-help — By requiring members to save regularly and by lending only what the society can afford, it teaches financial discipline and self-reliance instead of dependence.
• Protecting members from exploitation — By offering an honest, low-cost source of credit it frees members from the clutches of the private moneylender, who is the very evil the society exists to fight.
• Providing allied services — Larger societies may offer facilities such as safe custody of valuables, recovery of members' dues, guidance on the productive use of loans, and remittance of small sums.
• Building reserves — A part of every year's surplus is set aside as a reserve fund to strengthen the society and to meet unexpected losses, ensuring its long-term stability. …