What is the Role of Credit for Development?
By BYJU'S Exam Prep
Updated on: November 9th, 2023
The Role of Credit for Development plays a very important role in the growth and development of a country and hence it should be made available at affordable rates. The availability of an easy rate of credit is the first step towards an economically sound nation. Therefore, loans should be made available at affordable rates as far as possible so that a large number of people can actually benefit from them.
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Role of Credit for Development
Affordable rates lead to more borrowing by businesses and other institutions, which will directly lead to better economic growth in the country. We can say that ‘credit supply’ is the key point of the economic growth of a country.
There are two types of sources for credit facilities that can be opted for by an individual if he is looking for a financial source. One can choose from formal and informal sources of credit.
- Formal sources of credit are directly controlled by the government and are expected to follow the rules and regulations made by the government. These include loans from banks and cooperatives.
- Informal sources are not controlled by the government and operate independently without following any laws. These are loans from various sources like moneylenders, traders, traders, employers, etc.
Both sources of credit are open to the public or customers. But, it is always safer to go with government-regulated loan sources as they are well-supervised and secured.
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