Analyse the role of credit for development.

Manav needs a loan to set up a small business. On what basis will Manav decide whether to borrow from the bank or the moneylender? Discuss.

In India, about 80 per cent of farmers are small farmers, who need credit for cultivation.

(a) Why might banks be unwilling to lend to small farmers?

(b) What are the other sources from which the small farmers can borrow?

(c) Explain with an example how the terms of credit can be unfavourable for the small farmer.

(d) Suggest some ways by which small farmers can get cheap credit.

Fill in the blanks:

(i) Majority of the credit needs of the …………… households are met from informal sources.

(ii) …………… costs of borrowing increase the debt-burden.

(iii) …………… issues currency notes on behalf of the Central Government.

(iv) Banks charge a higher interest rate on loans than what they offer on ……………

(v) …………… is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender.