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Question
Explain with an example, how credit plays a vital and positive role for development.
Solution
Credit plays a pivotal role in the economic and infrastructural development of a country. Credit institutions like banks and other informal establishments provide loans to credit seekers which may include private individuals as well as national governments. Such aid provides reinforcement for production and an increase in profits as well as employment. For example, developing countries like Bangladesh and Brazil borrow heavily from international financial institutions like World Bank. This provides the necessary financial push for their various infrastructure projects and industrial expansion initiatives.
RELATED QUESTIONS
Why is it necessary for the banks and cooperative societies to increase their lending facilities in rural areas? Explain.
Why do we need to expand formal sources of credit in India?
__________costs of borrowing increase the debt-burden.
The following table shows people in a variety of occupations in urban areas. What are the purposes for which the following people might need loans? Fill in the column.
|
Occupations |
Reason for needing a Loan |
|
Construction worker |
- |
|
Graduate student who is computer literate |
- |
|
A person employed in government service |
- |
|
Migrant labourer in Delhi |
- |
|
Household maid |
- |
|
Small trader |
- |
|
Autorickshaw driver |
- |
|
A worker whose factory has closed down |
- |
Next, classify the people into two groups based on whom you think might get a bank loan and those who might not. What is the criterion that you have used for classification?
Answer the following question.
Describe the importance of formal sources of credit in economic development.
Answer the following question.
Describe the bad effects of informal sources of credit on borrowers.
Explain the importance of formal sector loans in India.
Explain any three reasons for the banks and cooperative societies to increase their lending facilities in rural areas.
Answer the following question.
Give any two examples of the informal sector of credit.
Answer the following question.
Why is cheap and affordable credit important for the country's development? Explain any three reasons.
