Question

“The credit activities of the informal sector should be discouraged.” Support the

statement with arguments.​

Answer 1

— High interest rate is offered by informal sector.

— It can mortgage the assets of rural people when they are unable to repay loans.

— Exploitation is present here because no paper work is required.

— Higher cost of borrowing means a larger part of earning of the borrowers is used to repay the loan and they have less income left for themselves.

— They can also use unfair means to get their money back.