question_answer

In situations with high risks, credit might create further problems for the borrower. Explain.

Answer:

If a farmer has taken a loan for crop production and due to unavoidable factors there is a crop failure then he cannot repay the loan.  Now again he has to take a new loan to repay the earlier loan or sell some part of his land. Therefore here credit has created problems for the borrower as he falls into a debt-trap.