Question

A landless worker in a village takes a loan of two bags of rice from the village landlord. The condition is that she will repay the loan in two and a half bags of rice at the end of one year. The interest paid equals _____.
A. The difference between the money value of rice between now and at the end of the year.
B. 31.25 percent of the original amount of loan
C. 25 percent of the original amount of loan
D. The difference between the rates of interest charged by banks between now and at the end of the year.

Answer 1

Hint: In the hands of moneylenders or wealthy farmers in the village, landless laborers are the most oppressed. They are deprived of a variety of basic services such as food, shelter, hygiene, sanitation, schooling, and jobs due to financial constraints. Landless laborers cannot afford these because they only serve during harvest season and are mostly unemployed the rest of the year.

Complete answer:
To fulfil their basic needs, small farmers and landless labourers often borrow money from big farmers. Taking out loans, on the other hand, adds to their suffering in the following ways:

1. Big farmers provide them with loans at high interest rates.
2. Small farmers and labourers are unable to raise sufficient funds and must take out additional loans to repay previous debts. Hence they get trapped in a vicious circle.

As a result, the loans favour big farmers instead of small farmers and landless labourers (workers).

Therefore, if a landless worker in a village takes a loan of two bags of rice from the village landlord. The condition is that she will repay the loan in two and a half bags of rice at the end of one year. Then the interest paid will be equal to 25% of the initial loan value. Zamindars and moneylenders take advantage of illiterate workers by charging them higher interest rates.

Therefore, option C) is the correct answer.

Note: To improve the situation of farmers who are in debt, the government could take the following steps:
1. The government can increase the number of jobs available in the villages. They will do construction work, giving these farmers jobs and ensuring that they have enough resources to meet their basic needs.
2. Every village should have its own bank. These banks should provide lower-interest loans to these farmers.