The absence of ____ as a guarantee is a major cause that prevents the poor from obtaining loans from formal sector sources such as commercial banks.

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The absence of collateral as a guarantee is a major cause that prevents the poor from obtaining loans from formal sector sources such as commercial banks.
One of the main reasons why poor people cannot acquire loans from formal sector sources, including commercial banks, is the lack of collateral as a guarantee. A sort of security that banks collect from their clients is known as collateral. It may take the form of property documents, fixed deposits, etc. The rural poor make very little savings. Offering bank collateral in exchange for loans is quite difficult for them. Each loan agreement stipulates the interest rate the borrower must pay the lender in addition to the principal repayment. Lenders may also need security (collateral) in exchange for loans.

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