What are the problems faced by small farmers and other poor people in getting loans from formal sources of credit? Suggest some measures to improve their access to credit.
Answer:
Answer by student
Small farmers and other poor people face many problems in getting loans from formal sources of credit, such as:
- Lack of collateral: Formal lenders usually require collateral as a condition for giving loans. However, small farmers and other poor people often lack collateral such as land titles, jewellery, vehicles etc. This makes them ineligible for formal loans.
- Low and irregular incomes: Formal lenders also assess the income and repayment capacity of the borrowers before giving loans. They prefer borrowers who have stable and regular incomes that can ensure timely repayment of loans. However, small farmers and other poor people have low and irregular incomes that depend on factors such as weather, market conditions, health etc. This makes them risky and unreliable borrowers for formal lenders.
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