Question

informal source of credit is very harmful for the borrower. yet rural people mostly depend on informal sources of credit for their needs explain it with suitable example ​

Answer 1

Answer:

Poor households still depend on informal sources of credit because:

Bank loans require proper documentation and collateral which is rarely available with poor households.

Informal sources of credit such as moneylenders know the borrowers personally and are often willing to give a loan without a collateral.

Sometimes, if the borrowers are unable to return the loan, they can get additional loans from moneylenders

Explanation:

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