Question

Why does rural people choose informal sectors for loans?

Answer 1

Rural people choose informal sector loans because:-
  
   1)Lack of banking facilities
   2)The process to take loans from banks require a lot of paper work which is          cumbersome for the people.
   3)Informal creditors knows the borrowers personally and can even sometimes       provide a loan with a collateral.

Answer 2

Answer:

They choose informal sector because:-

1. They are less educated.

2. In rural areas, there are no banks in their nearby.

3. Absence of collateral.

4. Informal lenders/ creditors knows the borrower personally so, they lend them money easily.

5. Flexible loans in terms of timelines, interest rates, procedural requirements, etc are provided to rural borrowers by informal sectors.