Question

"poor households still largely dependent on informal sources of credits to meet their neeeds'" why does this happen?

Answer 1

1. Banks are not present everywhere in rural India, whereas the informal sources are easily available in all the villages.
2. Getting a loan from a bank is much difficult than taking a loan from the informal resources because bank loans require proper documents and collateral. Most of the poor people don't possess anything to offer as collateral.
3. Moneylenders provide loan to the poor people without any collateral.
4. The formal sources provide loan only for productive purposes, whereas the informal sources provide credit for productive and non-productive purposes.
5.The methods of business of the formal sources are very complex, whereas the informal resources have a very simple way of business.

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Answer 2

HI THERE FRIEND!!!

Nearly 85 percentage of poor households are dependent on informal sources of credit to meet their needs.
This is largely due to the absence of collateral
which is an essential and important how to get the loan in the formal way.

This can be discouraged by sitting up
SHGs - self help groups