Most of the credit needs of the poor households are met from informal sources. The dependence of richer households on informal credit is less. Do you agree? Use the data from Table 1 to support your answer.

Yes. Most of the credit need of the poor households are met from the informal sources. They are forced to take from the informal sources because of a lack of knowledge about the credit system. Around 48% of the rural households are dependent on the informal sources of credit. The rural households are unaware of the credit system because of lack of education. In rural areas, the educational sector is very poor compared to the urban sector. Moreover poor are not guided with education because of the poverty. The richer people will depend less on the informal source of credit because they are aware of the banking system. Another main reason for the dependence of informal source of credit as collateral. Banks and other institutions need collateral for advancing the loan. Poor people will not have any collateral for raising fund from the formal sources of credit whereas richer people will have.