When it comes to rural credit, it is alleged that the borrowings are mainly confined to consumption purposes. Why are borrowers not spending for productive purposes?

Dear Student

In rural areas the people suffer from acute poverty . They usually don't have enough money for social occasions like marriages and funerals . So they tend to spend the credit received for such purposes rather than productive activities . Also for productive purposes they need small amounts of regular credit which is difficult to get . They do not have much knowledge about expansion of production or proper profitable usage of credit . The main tendency is to suffice immediate consumption needs ones they get the credit as most of their basic needs are not fulfilled . So productive activities get hampered in spite of receiving credit for the purpose .

Regards .


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