Question

85% of the loans taken by poor households in the rural areas are from ___.

• A. cooperatives
• B. local bank
• C. government bank
• D. informal sources

Answer 1

The correct option is D informal sources

Majority of the people in rural areas depend on informal sources for loans.

Informal sources include landlords and rich farmers.

The main reasons behind this are:

1. The number of banks in rural remote areas is low.

2. Bank loans require proper documents and collateral (security). Absence of collateral is one of the major reasons which prevents the poor from getting bank loans.

3. Informal lenders like landlords, know the borrower personally and hence, are often willing to give a loan without a security.