Q. 275.0( 2 Votes )

How can the forma

Answer :

1. Formal sector loans can be made beneficial for poor farmers and workers by generating the appropriate level of awareness among them as to why they should borrow credit from formal sources and not informal sources.

2. The awareness of low rates of interest and repayment of loans at low costs would help in attracting borrowers from the lower sections of the society. At the same time, the process of taking loans should be made convenient in accordance with their needs.


3. The no. of banks and cooperatives needs to be increased especially in small towns and rural areas so that the credit facilities can be easily available in proximity (nearby).


4. The exploitative practices of the informal sector render the small traders and workers helpless and force them into a debt trap. Therefore, the formal sources need to reach the targeted group of small-scale traders and business persons in order to generate healthy growth and prosperity.


5. The expansion of formal sources is not the only criteria. This makes it necessary that everyone receives these services and they are not only limited to the rich households. This has to be ensured by the formal sector.


NOTE – The extension of formal sources of credit is increasingly important because it carries an indirect impact on the overall development of the country’s economy. As formal sources would lend more, the incomes of various groups would increase which would result in better standards of living as well as the healthy growth and development of the economy.


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