1.

“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: 

  • Bank loans require proper documentation and collateral which is rarely available with poor households.
  • Informal sources of credit such as moneylenders know the borrowers personally and are often willing to give a loan without a collateral. 
  • Sometimes, if the borrowers are unable to return the loan, they can get additional loans from moneylenders.


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