10th Class Social Science Money and Credit

  • question_answer 32) Analyse the role of credit for development.

    Answer:

    Development is sustained by a proper credit policy. By giving loans to industries and trade, banks provide them with the necessary funds for carrying on their business without problems. This results in increased production and services, more employment and also profits. Caution is employed by the lenders when high risks are expected, so that there are no losses. Credit from the formal sector needs to be increased as loans from the informal sector, which have very high interest rates, do more harm than good. For this reason, it is important that the formal sector gives out more loans so that borrowers are not exploited by informal sector moneylenders, and the results definitely will contribute to national development. 

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