Question

most of the poor house holds are still dependent on informal sources of credit. Support the statement with arguments?
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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.

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Answer 2

Answer:

(i) Banks are not present everywhere in rural India, whereas informal sources are easily available in all villages.

(ii) Getting a loan from a bank is much more difficult for poor people than taking a loan from the informal resources, because bank loans require proper documents and collaterals.

Explanation:

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