Poor households in urban areas take loans from _____ sources.
a) formal
b) informal
c) direct
d) both (a) and (b)
Solution:
Option b (informal) is the correct option.
In urban areas, the people with poor households often have limited access to formal financial institutions, such as banks and credit unions, due to factors such as lack of collateral, low income, and limited financial literacy. As a result, they often turn to informal sources of credit, such as moneylenders, pawnshops, and friends and family, to meet their financial needs.
Option b (informal) is the correct option.
In urban areas, the people with poor households often have limited access to formal financial institutions, such as banks and credit unions, due to factors such as lack of collateral, low income, and limited financial literacy. As a result, they often turn to informal sources of credit, such as moneylenders, pawnshops, and friends and family, to meet their financial needs.