Solution:
The given statement is true.The credit activities of the informal sector should be discouraged because of the exploitative and unfair means they use. The informal sources of credit include relatives, friends, moneylenders, landlords, etc., who are outside the control and management of the government. No government body or institution is in place to supervise and regulate this sector, making it easy for the lenders to exploit the borrowers. They charge very high-interest rates and impose unreasonable conditions on needy borrowers, who have no choice but to give in to them. The rates charged to the borrowers are so high that a substantial part of their income is spent just on paying the interest, leaving the principal amount unchanged. Borrowers may be forced to sell off their assets or raise additional loans, which drives the borrowers into a situation known as the debt trap.
