What is credit? How does credit play a vital and positive role.explainwith an example
Answers
Credit’ refers to an agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payment.
Credit plays a vital and positive role as :
(i) Credit helps people from all walks of life in setting up their business, increase their income and support their families.
(ii) To some people, loan helps a lot in constructing their houses and get relief from monthly rent.
(iii) To others, it helps a lot in raising their standards.
(iv) Example of Salim: The credit helps him and he is able to increase his earnings
Answer:
Credit plays a crucial role in a country’s development. By sanctioning loans to developing industries and trade, banks provide them with the necessary aid for improvement.
This leads to increase in the production, profits and employment. However, caution must be exercised in the case of loans from the informal sector which include high interest rates that may be more harmful than good.
For this reason, it is important that the formal sector gives out more loans so that borrowers are not duped by moneylenders, and can ultimately contribute to national development.
For example- A loan given to a fresh post-graduate for setting up a business might contribute to employment generation, infrastructure development in the near future.