Question

Credit is useful as well as harmful it is depend on the risk involved . Explain the statement

Answer 1

Answer:

Credit is useful as well as harmful depending on the risk involved.

Explanation:

Credit is useful because

(i) It helps to meet the working capital needs of production.

(ii) It helps in setting up new industries or businesses.

But, it is harmful also that depends on the risk involved

(i) Credit pushes the borrower into a debt-trap in the case of high risk.

(ii) Instead of improvement in earnings, the borrower is much worse off than before. For example, farmers have to sell part of land to repay the loan.

From the above points, it can be concluded that credit is useful as well as harmful. It depends on the risk involved.