What are the diff erences between formal and informal sources of credit?

Question

Philoid · Accepted Answer

Points on Which Different	Formal Sources of Credit	Informal Sources of Credit
Borrower’s capability	Richer people can borrow easily as they have assets and guarantee of returning the debts on time.	Poorer people can’t borrow because of lack of assets and any documents and incapability of returning the debts.
Rate of interest	Reasonably low	Very high
Sources	Banks and co-operative societies	Traders, moneylenders, landowners, etc.
Action on default of payment	Collateral can be confiscated and sold to recover the loan	Borrowers can be made as bonded labourers or made to part with land owned by them

What are the differences between formal and informal sources of credit?