How credit play positive and negative role? Explain in points with example
Answers
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1. it help to meet going expension of production.
2. it helps to meet on working capital.
3. it helps to complete production on time.
4. it helps to increase income of producer.
5. it helps to generate trust.
NEGATIVE ROLE OF CREDITS
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1. Credits pushes the borrowed in depth.
2. Credits reduces the repulation of the borrower.
3. Credits reduces the borrower to self it fixed asserts.
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Answer:
credit plays a positive role when it helps to meet the capital needs of the production,thus production increases also profit increases
credit plays a negative role when it is not able to meet the credit needs this may be because of failure in agriculture(eg for rural) or fall of market (eg for urban) so it creates a situation in which the recovery is very painful and it is very difficult or impossible to repay the credit.
Explanation:
salim a shoe maker gets order for 3000 pairs of shoes to be delivered within a month to a trader ,he hires more labourers for completing production at time, he takes credit from two sources 1 from the leather supplier as he promises to pay the money later,then to the trader as attains advance for 1000shoes in promise to finish production at time. At the end he is able to finish the production at time and he is able meet ungoing expences,thus credit plays a positiverolein this situation.
swapna a small farmer grows groundnut on her three acres of land she takes a loan from moneylender, but is hard stricken because pest attacks her crops and she is unable to grow her crops and she buys pesticides which are very expensive and last she finds her yied is less and to repay credit is very difficult this she sells a oart of her land in this case credit does not meets the working capital need for production and pushes her to debt trap.