Question

Why do the poor households rely on informal credit till today? Explain.

Answer 1

Poor household still depends on informal source of credit because formal source of credit like bank provide loan only for productive purpose but moneylenders, landlords provide loan for all things.

Formal source of credit requires a lot of paper work but it is not needed in informal source of credit.

Hope it helps you!

Answer 2

Answer:-

• Formal sector do not grant loan for every reason where as informal sector grant loan for any reason.
• Formal sector needs a lot of documentation where as informal sector does not need lots of documentation.
• Banks are not present in the rural areas but the informal sector is easily available there.

Hope it helps you!!!!