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Rural Credit Union

The article below reveals that the scenario of the rural credit union and the credit union in the urban areas differ. There are differences in the accessibility to loans. The urban people have easy access to credit, which is not the case with the rural people.
Credit unions may be referred as "financial cooperatives", which function on the basis of "democratic control" as well as "open membership". Credit unions immensely benefit the people with low income whose accessibility to savings as well as credit sources are restricted or limited.

In the urban regions, credit unions are well rooted. But there are certain hindrances,which have been encountered in establishing a strong base in the rural areas. Due to these factors, economic growth in the rural areas is becoming increasingly troublesome. There are certain characteristics, which hinder the establishment of rural credit union and these characteristics ought to be taken into consideration.
They are as follows:
  • Availing finance for economic development in the rural areas is a major problem for rural credit union. Funding for the urban areas is easily available as compared to the rural areas. Moreover, economic development in the rural areas have additional costs.
  • If there is a dearth of banking facilities in the rural areas, the success of rural credit unions gets minimized. In the event when the population of the rural area is diverse, success of rural credit union is at stake.
  • Any type of transaction in the rural area means handling cash. Transferring cash from collection terminal to the place where it is to be kept requires a certain amount of logistics and security. This may prove to be a problem.
  • It was observed that the volunteers who managed the rural credit unions differed in their profile. The volunteers of the rural credit union were more concerned about the welfare of their own people instead of trying to improve their working skills or assisting rural people with loans.


Ways to Overcome the Hindrances:
To bring about alterations in the manner in which the rural credit unions function. This may necessitate changes in the representational structures. The national bodies are required to coordinate better among themselves and monitor the activities of the rural credit union.

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Last Updated on : 30th July 2013

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