Question

why are formal sources of credit preferred over the informal source of credit? Give three reasons.​

Answer 1

Explanation:

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We need formal sources of credit in order to reduce the dependence of farmers on informal sources of credit like money lenders.

We need formal sources of credit in order to reduce the dependence of farmers on informal sources of credit like money lenders.To reduce the higher risk associated with informal sources of credit because of fluctuating terms and conditions.

We need formal sources of credit in order to reduce the dependence of farmers on informal sources of credit like money lenders.To reduce the higher risk associated with informal sources of credit because of fluctuating terms and conditions. To avail cheaper credit to farmers in rural areas.

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Answer 2

Answer:

Formal sources of credit preferred over Informal sources of credit because:

i.Formal sources have low cost of borrowing

ii.Higher Income through cheapborrowing.

iii.No exploitation and debt trap.

iv. Any other relevant point.