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CBSE Class 10 Answered

Though informal credit sources charge a very high rate of interest, rural poor people still generally take loans from them. Give reasons.
Asked by Topperlearning User | 03 Jul, 2014, 10:09: AM
answered-by-expert Expert Answer

Poor people in rural areas are still dependent on informal credit sources such as the moneylenders who charge an exorbitant rate of interest on the given loans. It is because banks are not present in far-off villages in rural India. Further, taking a loan from a bank is much difficult due to extensive paper work. Banks also demand collateral from the people for advancing loans, which is absent in the case of poor labourers.

On the other hand, the money lenders do not ask for collateral and no paper work is required. Thus, people still take loans from informal credit sources in rural areas.

Answered by | 03 Jul, 2014, 12:09: PM

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