The rural poor depend on ____ sources of credit.

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Detailed Solution

The rural poor depend on informal sources of credit.
Rural borrowers have to depend on informal sources of credit for a few reasons, like lack of collateral and proper documents. Moreover, there is vast flexibility given by informal sources in terms of timelines, interest rates, and procedural requirements. However, they also charge a high rate of interest, which might lead to a debt trap for people. The government can take some steps to encourage rural borrowers to borrow from formal sources, like spreading awareness and making rural people aware of the debt trap of such moneylenders. The government can also promote self-help groups as it also encourages the habit of saving among the poor.

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