Question

In your opinion between formal and informal credit, which one is superior and why?

Answer 1

• Formal Credit Sector:- Formal financial institutions ignore small farmers, lower-income households, and small-scale enterprises in favour of a larger-scale, well-off , and literate clientele which can satisfy their stringent loan conditions.
• Informal Credit Sector:- The informal financial sector provides savings and credit facilities for small farmers in rural areas, and for lower-income households and small-scale enterprises in urban areas.