Question

drawbacks of informal sources of credit.




Give your answer in proper 5 points.




Best answer will be chosen as a BRAINIEST and will get 20 points.​

Answer 1

Answer:

I don't know the answer do you know

Answer 2

Drawbacks of informal sources of credit are-

1) There is no organisation which supervises the credit activities of the informal sector.

2) Money may be lent at very high interest rates.

3) There is nobody to stop the lenders from getting their money back by unfair means.

4) Because of high costs of borrowing, a larger part of the earnings of the borrowers is used to repay the loan. Hence, borrowers have less income left for themselves.

5) In some cases, high interest rates may mean that the amount to be repaid is higher than the income of the borrower. In such cases, the borrower may be drowned in more and more debt, or debt trap.

6) People who might wish to start an enterprise by borrowing may not do so because of the high cost of borrowing.