“Poor households still depend on informal sources of credit.” Support the statement with examples.
Answer:
Poor Households still depend on informal sources of credit because:-
- Banks are not present everywhere on rural area.
- Even when they are present getting a loan from the bank is much more difficult than tabbing a loan from informal sources.
- Mega banks or public sector banks require proper documents and collateral.
- Absence of collateral is of one of the major reasons which prevent the poor from getting bank loans.
- Informal lenders such as money lenders they know the borrowers personally and they are willing to give a loan without collateral.