Why do you think that the share of formal sector credit is higher for the richer households compared to the poorer households?

Q.:- Why do you think that the share of formal sector credit is higher for the richer households compared to the poorer households?

 

Answer:-

The share of the formal sector credit is higher for the richer households because the richer households are in a better position to provide collateral and other necessary documents which are required by the banks and co-operatives. Richer households have means to exert pressure on banks and co-operatives to sanction loans. Richer households have greater capacity to repay the loans compared to the poor households.