Question

Compare and contrast the role of formal and informal source of credit. (5)marks​

Answer 1

Answer:

Explanation:

Formal sources usually charges lower rates of interest whereas in informal sources they charge much higher rates of interest. The main motive of formal sources is social welfare whereas the main motive of informal sources is profit-making.

Answer 2

HERE IS YOUR ANSWER:

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FORMAL SECTOR

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•We can get formal sector credit loans from Bank, LIC etc

•They are under the control of RBI

•If we don't pay the loan back the take legal action

•They give loan in reasonable interest

•Collateral is necessary

•This take more time for process

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INFORMAL SECTOR

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•We can get informal sector credit loans from Money lender, Trader, relatives etc

•They are not under the control of RBI

•If we don't pay back the loan they may take illegal action

•They give loan in high interest

•Collateral is not necessary ,it depends on the people's will and wish

•They actually don't take more time for the process

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