Why do poor houses mainly rely on informal sources for credit?

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The lack of proper Banking facilities.

Even if banks are established in some rural areas it is difficult to get credit from them due to a lot of paperwork

Both 1) and 2)

None of these

answer is C.

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Detailed Solution

Poor houses mainly rely on informal sources of credit because of the lack of proper Banking facilities. Even if banks are postural areas, it is difficult to get credit from them due to a lot of paperwork and the need for collateral which makes taking credit from the bank very cumbersome. One of the main reasons is that informal creditors like money lenders know the borrowers personally. So, they provide them with the loan without collateral but charge a higher interest rate.

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