'Formal sector of credit better than informal sector.' Give arguments in support of your answer.

i. Cheap and affordable credit is crucial for the country’s development.

ii. Most loans from informal lenders carry a very high interest rate and do little to increase the income of the borrower.

iii. Formal source of credit would lead to higher incomes and many people could then borrow cheaply for a variety of needs, without getting into the debt trap.

iv. Individuals could grow crops, do business, set up small-scale industries etc.

v. Thus, it is necessary that banks and cooperatives increase their lending particularly in the rural areas, so that the dependence on informal sources of credit reduces.