Question

What are informal sources of credit? Mention any two featuresof it

Answer 1

Landlords, moneylenders, traders, relatives, friends and other sources of credit constitute the informal sector of credit

Informal sources of credit have:
*Very high rates of interest
*No external organization to control the sector
*The money lenders can also resort to unfair means to get their money backIn spite of disadvantages, they are more popular than formal sources of credit in India

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Answer 2

It explain the sources of credit which does not follow any legal rules and regulation and does not run under the guideline of government

The features of informal sources of credit are

(a) Informal sources of credit are moneylenders, traders, employers, relatives, friends etc.

(b) There is no government or private organisation that manages or check the credit activities performed by informal sources.

(c) Their terms of credit are flexible for the personal benefit of the lenders and condition of borrowers.

(d) They generally charge higher rates of interest and exploit the borrowers for their own benifits.