Question

Describe the importance of formal sources of credit in the economic development.

Answer 1

Answer:

Formal sources of credit gives money at less interest rates as compared to informal sector so the profit which the borrower earns is more. Answer: Formal sources of credit gives money at less interest rates as compared to informal sector so the profit which the borrower earns is more.

Answer 2

Formal credit sources offer capital at lower interest rates relative to informal market and the income the borrower receives is increasing.

Explanation:

• Structured credit sources offer money at lower interest rates than the informal market, so the borrower makes more income.
• Money contributes to higher consumption, thereby rising consumer benefit rates. This in effect contributes to higher GDP (GDP) and therefore stronger productivity growth. If credit is used to purchase valuable capital it leads to economic development and adds to profits.

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