What do you mean by formal and informal credit
Answers
Answer:
Formal sources follow the sources of credit that are registered by the govt. and have to follow its rules and regulations whereas in informal sources include those small and scattered units which are largely outside the control of the government.
Answer:
Informal Credit operations involving lending, generally at short-term, among friends, relatives, kin members, landlords, neighbours, shopkeepers, farmers, artisans, itinerant traders, marketing intermediaries, village moneylenders and other local income groups. Informal credit includes various traditional non-institutional ways of accumulating and extending credit. Although informal credit markets exist in urban areas, the term generally refers to rural informal credit markets where institutional credit facilities are absent or insufficient to cater to the needs of local professionals of different categories. Informal credits are supplied at little or no interest to farmers, local poor people and marginal professionals of various groups, relatives, and friends. Usually the traders, large landowners, and moneylenders dominate as the suppliers of informal credit.
Formal credit:Loans provided by formal banking institutions, regulated by government law. Learn more in: Financial Instruments for Small and Medium Enterprise Sustainable Growth: Strategies for Latin American Emerging Economies