Choose the given statement that is true/false.

Formal sector loans are different from informal sector loans.

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True

False

answer is A.

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Detailed Solution

The above statement is true.
Loans for the informal sector are a type of loan that can be obtained via moneylenders, coworkers, etc. Loans for the formal sector are a type of loan typically obtained from banks or cooperatives. Higher-income individuals and large business organizations can apply for loans from the traditional credit sector with the necessary paperwork and collateral. It has intricate processes. It has a small interest rate. Loanable funds are frequently available. The cost of transactions is considerable. Small farmers in rural areas, low-income individuals, and small businesses in metropolitan areas can borrow money from the informal lending industry. It is relatively easy, non-bureaucratic, and requires little written documentation to obtain credit. It has a highly high-interest rate. Seasonal changes might affect the amount of loanable money and its availability.

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