Role of Credit for Development

Question 1: What is Credit?

Answer:

Credit permits one party to lend another party money or resources with the condition that the second party does not immediately pay the first party back but instead promises to pay back or return the resources later.

Question 2: What is the role of loans in the development of the country?

Answer:

Bank loans helps in commerce. Manufacturers borrow from the banks the money which is required for purchase of raw materials and meet other important requirements such as working capital. It is safe to keep money in bank and also helps to earn interests.
 

Question 3: Describe the main uses of credit in the development.

Answer:

The following are the primary uses of credit in development:

1. for earning more capital in the future.
2. for crop production
3. for establishing new businesses.
4. for pursuing education
5. for constructing the social infrastructure.

Question 4: Describe the disadvantages of credit.

Answer:

Credit Disadvantages:

1. costly loan fees if not fully repaid by the due date.
2. Annual fees for various types of credit can be expensive over time.
3. The penalty fee for late payment.

Question 5: What is the role of credit in society?

Answer:

Credit refers to the service for lending funds from the financial institutions to customers. The proceeds of loan are used to meet the community needs, such as buying goods, adding property or vehicle assets or for increasing the stock of goods.

Credit is the trust that permits one party to lend money or resources to another, with the understanding that the second party will either repay or return the resources (or other goods of comparable value) at a later time, avoiding the creation of debt in the process. Credit is a technique for implementing mutuality, making it enforceable by law, and extending it to a considerable number of unrelated persons.

The resources offered may take the form of money (such as the granting of a loan), commodities, or services (e.g., consumer credit). Any kind of postponed payment is considered credit. Credit is given to a debtor, also known as a borrower, by a creditor, also known as a lender.