The credit Activities of the informal sector should be discouraged.Support the statement.
Answers
they are informal sourses og credit activites.. they charge high interest and have no paperwork done before givin loan
Answer:
The credit activities of the informal sector should be discouraged because: 85% of loans taken by the poor households in the urban areas are from informal sources. ... Higher cost of borrowing means a larger part of the earnings of the borrowers is used to repay the loan
Explanation:
The credit activities of the informal sector should be discouraged because:
85% of loans taken by the poor households in the urban areas are from informal sources.
Informal lenders charge very high interest on their loans.
They try to charge more and more interest on their loans.
There are no boundaries and restrictions.
Higher cost of borrowing means a larger part of the earnings of the borrowers is used to repay the loan.
In certain cases, the high interest rate for borrowing can mean that the amount to be repaid is greater than the income of the borrower.
This could lead to increasing debt and debt trap, therefore the credit activities of the informal sector should be discouraged.