Question

Why are poor household still dependent on informal sources of credit

Answer 1

hello friend , here is your answer

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For a person to take credit from a formal resource ,

1)-he/she must have some required documents .
The most important of those is Collateral . It can be something which the lender have as a guarantee so that he could sell it if the money from borrower is not related . the few examples of collateral are the papers of some plot , or car , or land ,etc . As poor people don't have collateral , so they take credit from an informal source.

2)- This process of taking loan from a formal sector is very cumbersome and complicated .
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hoping that my answer helped you .

Answer 2

Poor households still depends on informal sources of credit because:

1.Taking loan from formal sector is time consuming and requires many procejors.

2.Formal sector did not give loan to borrowers unless borrowers summit their collateral and proper documentation . As poor households do not have collateral and documentations. Thus they depend on informal sector for their loans

Hope it helped u :)