The poor have to depend on ____ for credit needs.

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Detailed Solution

The poor have to depend on informal sources for credit needs.
For poor households, only 15% of their total credit needs are met by formal sources. The remaining 90% is from informal sources, which charge an exorbitant rate of interest. There are a few reasons why the poor have to depend on informal sources:
1)      Banks may not be found everywhere in rural areas, whereas informal sources are easily available.
2)      Proper documents and collateral are required by banks before they sanction a loan. Informal sources do not ask for any collateral.
3)      Formal sources only grant loans for some specific purposes, which are productive, but informal sources don't focus on the purpose for which the loan is taken.

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