Question :Explain the role of micro-credit system in meeting credit requirements of poor.
The correct answer is -The micro-credit system refers to the provision of small loans to individuals, particularly poor people, who do not have access to traditional banking services. Micro-credit plays a critical role in meeting the credit requirements of the poor in several ways:
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Access to credit: The micro-credit system provides poor people with access to credit, which they would not have otherwise. By providing small loans to poor people, micro-credit institutions enable them to invest in their small businesses, purchase assets, and improve their standard of living.
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Empowerment: Micro-credit institutions help to empower poor people by providing them with the means to improve their economic status. Poor people often lack access to capital, which makes it difficult for them to start or expand their businesses. By providing small loans, micro-credit institutions help poor people to overcome this barrier and become self-reliant.
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Social development: The micro-credit system also plays a role in social development by helping to reduce poverty and inequality. By providing poor people with access to credit, micro-credit institutions help to create employment opportunities and improve the standard of living of the poor. This, in turn, contributes to social development and helps to build more inclusive societies.
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Financial inclusion: Micro-credit institutions also help to promote financial inclusion by providing poor people with access to financial services. In many cases, poor people do not have access to traditional banking services, and this can be a significant barrier to their economic and social development. By providing small loans, micro-credit institutions help to promote financial inclusion and provide poor people with the means to manage their finances more effectively.
