Question

Two different credit situation?​

Answer 1

Answer:

Credit arrangements can be divided into two categories. These are as follows:

Formal Sector- It includes banks and cooperatives that extend loans to households for entrepreneurship and other personal needs. The rates of interest charged by them are low.

Informal Sector- It includes moneylenders, traders, employers, relatives, and friends. The moneylenders generally charge at a higher rate of interest.