Question

Why do you think that the share of formal sector credit is higher for the richer households compared to the poorer households?

Answer 1

Because in formal sector collateral is demanded on giving a loan. Richer household can afford to give as such collateral. But poorer people don't have any as such asset to give as collateral.

Answer 2

ᴛʜᴇ sʜᴀʀᴇ ᴏғ ᴛʜᴇ ғᴏʀᴍᴀʟ sᴇᴄᴛᴏʀ ᴄʀᴇᴅɪᴛ ɪs ʜɪɢʜᴇʀ ғᴏʀ ᴛʜᴇ ʀɪᴄʜᴇʀ ʜᴏᴜsᴇʜᴏʟᴅs ʙᴇᴄᴀᴜsᴇ ᴛʜᴇ ʀɪᴄʜᴇʀ ʜᴏᴜsᴇʜᴏʟᴅs ᴀʀᴇ ɪɴ ᴀ ʙᴇᴛᴛᴇʀ ᴘᴏsɪᴛɪᴏɴ ᴛᴏ ᴘʀᴏᴠɪᴅᴇ ᴄᴏʟʟᴀᴛᴇʀᴀʟ ᴀɴᴅ ᴏᴛʜᴇʀ ɴᴇᴄᴇssᴀʀʏ ᴅᴏᴄᴜᴍᴇɴᴛs ᴡʜɪᴄʜ ᴀʀᴇ ʀᴇϙᴜɪʀᴇᴅ ʙʏ ᴛʜᴇ ʙᴀɴᴋs ᴀɴᴅ ᴄᴏ-ᴏᴘᴇʀᴀᴛɪᴠᴇs. ... ɪɴ sɪᴛᴜᴀᴛɪᴏɴs ᴡɪᴛʜ ʜɪɢʜ ʀɪsᴋs, ᴄʀᴇᴅɪᴛ ᴍɪɢʜᴛ ᴄʀᴇᴀᴛᴇ ғᴜᴛᴜʀᴇ ᴘʀᴏʙʟᴇᴍs ғᴏʀ ᴛʜᴇ ʙᴏʀʀᴏᴡᴇʀ.