Most of the credit needs of the poor households are met through informal sources. the dependence of richer households on informal credit is less. do you agree?
Answers
Answer:
Majority of the credit needs of poor households are met from informal sources.
Poor households often get exploited with higher interest from money lenders.
Poor households borrow money from money lenders because they don't have any form of security (collateral) as requested by the formal sources of credit.
(i) Majority of the credit needs of the poor households are met from informal sources. (ii) High costs of borrowing increase the debt-burden. (iii) Reserve Bank of India issues currency notes on behalf of the Central Government. (iv) Banks charge a higher interest rate on loans than what they offer on deposits. (v) Collateral is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender.
Explanation:
PLEASE FOLLOW ME
➤ More than 2/3rd of farmers do not have access to bank loan facilities.
➤ The rich households are getting 90% of their credit from formal sources and 10% from informal sources.
➤ The poor households are getting 15% of their credit from formal and 85% from the informal sources.
➤ Yes, I agree that the dependence of richer households on informal credit is less.
➤ Where as the dependence of poor households on informal credit is more.