Question

Why is cheap and affordable credit important for the country's development? Explain any three reasons.

Answer 1

Cheap and affordable credit is crucial for the country's development due to the following factors:

• More lending would lead to higher incomes and encourage people to invest in agriculture, engage in business and set up small scale industries.
• Cheap credit means more income would be left with the borrower to reinvest rather than return as interest. This leads to acceleration of economic activity.
• Cheap credit would also allow weaker sections of society to enter formal sector of lending and rid them of exploitation at the hands of informal moneylenders. Thus, it may improve the economic condition of the poor and landless.