alleryStart learning →Why were many poor rural households excluded from formal credit?
AThey had no farming land use
BThey could not provide collateral
CThey were barred by law
DThey refused bank accounts
Answer & Solution
Correct answer: B. They could not provide collateral
1. Formal lenders require security against a loan.
2. Poor households typically have no asset to pledge.
3. Because **collateral is required**, a vast proportion were automatically outside the credit network.
4. Self-Help Groups emerged precisely to fill that gap, lending from pooled member savings instead.
_Source: syllabus Indian Economic Development, Ch 5 "Rural Development", section 5.3 CREDIT AND MARKETING IN RURA L_
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