12. Why do you think that credit plays a positive role in the situation of Swapna, where as it plays a negative role in the situation of Salim? Explain.
Answers
Answer:
We can give examples of Salim and Swapna in support of this statement.
(i) Salim is a shoe manufacturer. He obtains credit to meet the working capital needs of production. The credit helps him to meet the ongoing expenses of production, complete production on time and thereby increase his earnings.Credit, plays a vital and positive role in this situation.
(ii) Swapna is a small farmer and grows groundnuts in her three acres of land.She takes a loan from the moneylender to meet the expenses of cultivation,hoping that her harvest would help repay the loan. But the failure of crops makes loan repayment impossible. She has to sell a portion of her land to repay the loan. Credit, instead of helping Swapna improve her earnings,leaves her worse off. She falls into a debt trap.
Credit plays a positive role in the situation of Swapna, whereas it plays a negative role in the situation of Salim. These are the following reasons:-
- Here in the given situation, it has been mentioned that Swapnil is a producer of shoes.
- He takes a loan from the bank and because he has established a business the bank gives him loans.
- With the help of this loan, he can bear the expenses of the working capital that is engaged in the production and complete his production and sells after that reimburse the bank.
- Thereby, by taking a loan Swapnil is actually expanding his business.
- But in the case of Swapna, it is totally different because she is a farmer of a small category producing small amount of groundnuts.
- Bank does not give her a loan so she has to go to a money lender and has to pay exorbitant interest.
- If one year's harvest goes bad then she cannot reimburse the money of the loan.
- Therefore, taking the loan is negative credit for Swapna.