The credit activities of the informal sector should be discouraged support the statement and mention a few steps taken by RBI in recent past in this regard?
Answers
Answered by
2
1 Access to safe, easy and affordable credit and other financial services by the poor and vulnerable groups, disadvantaged areas and lagging sectors is recognised as a pre-condition for accelerating growth and reducing income disparities and poverty. Access to a well-functioning financial system, by creating equal opportunities, enables economically and socially excluded people to integrate better into the economy and actively contribute to development and protect themselves against economic shocks. Despite the broad international consensus regarding the importance of access to finance as a crucial poverty alleviation tool1 , it is estimated that globally over two billion people are currently excluded from access to financial services (United Nations, 2006a). In most developing countries, a large segment of society, particularly low-income people, has very little access to financial services, both formal and semi-formal. As a consequence, many of them have to necessarily depend either on their own or informal sources of finance and generally at an unreasonably high cost. The situation is worse in most least developed countries (LDCs), where more than 90 per cent of the population is excluded from access to the formal financial system (United Nations, 2006a).
7.2 Theories of development advocate that financial development creates enabling conditions for growth through either a ‘supply-leading’ (financial development spurs growth) or a ‘demand-following’ (growth generates demand for financial products) channel. Earlier theories of development hypothesised that a rise in inequality was inevitable in the early stages of development. The early literature on the subject focussed on the need to develop an extensive financial system that could tap savings and then channel the funds so generated to a wide spectrum of activities. The modern development theory perceives the lack of access to finance as a critical factor responsible for persistent income inequality as well as slower growth. A large body of empirical literature suggests that developing the financial sector and improving access to finance may accelerate economic growth along with a reduction in income inequality and poverty. Without an inclusive financial system, poor individuals and small enterprises have to rely on their own limited savings and earnings to invest in their education and entrepreneurship to take advantage of growth opportunities (World Bank, 2008).
7.2 Theories of development advocate that financial development creates enabling conditions for growth through either a ‘supply-leading’ (financial development spurs growth) or a ‘demand-following’ (growth generates demand for financial products) channel. Earlier theories of development hypothesised that a rise in inequality was inevitable in the early stages of development. The early literature on the subject focussed on the need to develop an extensive financial system that could tap savings and then channel the funds so generated to a wide spectrum of activities. The modern development theory perceives the lack of access to finance as a critical factor responsible for persistent income inequality as well as slower growth. A large body of empirical literature suggests that developing the financial sector and improving access to finance may accelerate economic growth along with a reduction in income inequality and poverty. Without an inclusive financial system, poor individuals and small enterprises have to rely on their own limited savings and earnings to invest in their education and entrepreneurship to take advantage of growth opportunities (World Bank, 2008).
Answered by
2
Explanation:
The credit activities of the informal sector should be discouraged support the statement and mention a few steps taken by RBI in recent past in this regard?
Similar questions