Why do the rural borrowers depend on the informal sector of credit
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They don\’t have much knowledge to fulfill the bank\’s needs or formalities. Also don\’t have anything to keep as collateral.
… absence of collateral and documentation ..Absence of awareness among the people about the formal credit
The rural borrowers depend on the informal sector for credit because :(i) Absense of collateral and documentation.(ii) Flexible loans in term of timelines, interest rates, procedural requirements etc.