Question

Why do you think the share of formal sector credit is higher for the richer households as compared to the poorer ones?
(Please give the answer point wise and be written in an easy language).
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Answer 1

Explanation:

1. the richer households tend to be more educated and hence know better about the benefits of formal sector
2. they can arrange collateral quite easily as compared to poor households and collatertos a pre requisite for availing formal loans
3. the richer households seem more trustworthy of returning the loan on time
4. they usually live in cities where banks are more likely to be located
5. the poor people like to borrow from informal sources where they can ask for loans even when they have not repaid the previous one and have no collateral