Q.An agricultural credit society gives its farmer-members short-term as well as medium-term loans. Explain the difference between these two kinds of loan with suitable examples.

Agricultural credit societies match the type of loan to the purpose and repayment period of the farmer's need.

An agricultural credit society tailors its lending to the different needs of a farmer, and these fall broadly into two kinds:

1. Short-term (crop) loans.

• Purpose: to meet the recurring, seasonal costs of raising a crop — buying seed, fertiliser and pesticides, and paying labourers' wages.
• Period: short, usually up to about a year, repayable after the crop is harvested and sold.
• Example: a farmer borrows money at sowing time to buy seed and fertiliser and repays it once the harvest is sold.

2. Medium-term loans.

• Purpose: to buy durable assets or make improvements that raise the farm's productive capacity — cattle, pump-sets, ploughs and other implements, or land improvement such as bunding and well-digging.
• Period: longer, typically a few years, because the asset yields its benefit over several seasons.
• Example: a farmer borrows to buy a pair of bullocks or to install a pump-set, repaying the loan in instalments over three to five years. …

Do not confuse the loan periods, or describe both loans as being for cultivation. The distinguishing points are the purpose (running cost vs. durabl …