Question

why do the poor house households rely on informal credit today? Explain

Answer 1

hyy...Banks are not present everywhere.If they are present then taking loan from them is very difficult.Absence of collateral is a major cause of poor for not availing loan from banks.moneylenders know the borrowers personally and do not ask for collateral.Moneylenders can give fresh loans even when earlier loans have not been repaid...

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Answer 2

For the large number of poor people in our country, it becomes difficult to avail loans from formal sources of credit, such as the Bank, etc. due to the lack of proper Collateral, documentation, etc. As a result, they are bound to take the help of informal sources of credit, who charge high interest rates, even if they usually do not require Collateral and documentation...

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