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Q.

Rural households still depend upon the informal sector for loans because?


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a

They provide money without any collateral

b

There is low availability of formal loans in rural areas

c

No documentation is required

d

All of the above 

answer is D.

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Detailed Solution

The rural households in our country are still dependent on the informal sector for loans as they provide money without collateral, don’t require any documentation, and there is low availability of formal loans in rural areas. Due to this dependence on the informal sector of loans, people in rural areas are prone to the situation of a debt trap. The situation of the debt trap further exacerbates poverty.
 
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