Choose the correct-matched pair about the percentage of the formal sector in total credit in India in poor households.

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Poor - 15%

Middle - 20%

Rich - 70%

Very poor - 80%

answer is A.

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Detailed Solution

Poor - 15% is the correct-matched pair about the percentage of the formal sector in total credit in India in poor households.
Among the poor households, only 15% were interested in taking traditional sector loans in India. This is because low-income families' inability to secure collateral and lack of proper literacy makes it hard to deal with all the paperwork needed to secure a loan from formal sector lenders. As a result, about 85% of the loans taken by poor households in urban areas are from informal sources. A similar pattern is observed in rural areas; wealthy families avail cheap credit from formal lenders as they have sufficient collateral to secure it. In contrast, poor households are forced to borrow from informal sources, which charge a high-interest rate on their loans.

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