Question

Why poor peole or villagers need to give loans by banks?

Answer 1

If your question is: Why should poor people and villagers be given loans from banks?

Then here’s the answer.

Currently, the poor tend to turn to informal sources of credit, i.e., landlords, rich relatives etc., who give loans under harsh conditions. They take very high interests or take other forms of advantages. The high interest leads the poor to be stuck in a ‘debt trap’, as he’d go on trying to pay the interests.

On the other hand, banks provide loans with much lesser interest rates. However, their collateral security, tons of paperwork and required documentation makes it impossible for a labourer or small farmer to take loans.

Therefore, banks should have less strict policies for people facing poverty.