Choose if the given statement is True/False.

The formal sector charges less interest rates for loans than the informal sources.

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True

False

answer is A.

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Detailed Solution

The given statement is True.
When poor households start getting loans from formal sources then they will save themselves from a vicious cycle of poverty in which they get caught after taking loans from informal sectors. The informal sector charges a very high rate of interest and even if the person is unable to return the loan, they exploit him and many times seize their land. Formal sources will stop these types of exploitation from happening to men and women of poor households. Poor households have more savings after taking a loan from the formal sector because of the low rate of interest charged by them.

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