Why debt trap is more rampant in rural areas
Answers
Debt-trap is a situation in which a person after taking a loan is not able to pay back the loan.
It is more common in rural areas because
(i) A borrower repays a loan by selling the agricultural produce, which sometimes may not be enough to repay the loan.
(ii) Rural borrowers normally depend on informal sources of credit who charge a high rate of interest. This repayment of larger amounts may sometimes be larger than their income.
Thus, it can be concluded that loans from banks always help to raise^people’s earning capacity.
Debt trap means if a farmer has taken 2 or more debt from landlords or zamindar and he is unable to repay the money. then the farmer is in debt trap.
it's more in rural areas because
1) There is no banking loan facilities in rural areas
2) They have no collateral in form of guarantee to repay the loan.