Which of the following is a primary reason that prevents the poor from getting bank loans?

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High interest rate

Lack of personal connection

Lack of proper documents

Absence of collateral

answer is D.

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Detailed Solution

The absence of collateral is a primary reason that prevents the poor from getting bank loans.
The formal sector loan providers offer loans only if the person taking the loan has a property in the form of collateral. Collateral is a kind of security or mortgage which banks ask the borrower to keep against loans so that if the borrower fails to pay back the loan and interest on time, the bank can sell off this mortgaged property and recover the amount of loan from the same. But, unfortunately, the poor section of society has no property to be kept as collateral. As a result, the poor section of society prefers to take loans from the informal sector even after knowing that the latter charges more interest.

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