Question

Why are borrowers not spending for productive purposes?

Answer 1

Explanation:

So they tend to spend the credit received for such purposes rather than productive activities . Also for productive purposes they need small amounts of regular credit which is difficult to get .

Answer 2

The people living in the rural areas borrow money for spending for their urgent need and requirements and they do not have proper knowledge regarding making profitable use of of the credit facilities.

Explanation:

• The borrowers from the rural areas live in poverty and they do not have enough money for taking care of their basic needs. They are hesitant to approach the formal institutions for credit  since they do not have the  proper documents or the collateral needed for the credit facilities.
• The people from the rural areas have the regional rural banks which provide them with credit facilities at cheaper rate of interest.  The people spend the credit money on other needs in the family than using it for more productive purposes.
• Normally for the productive purposes people require small amounts of money on credit which is not easy to get. They utilize the credit money on their immediate needs of consumption and their other productive needs remain unfulfilled.

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