Cheap and affordable credit is important for the country’s development because:
- It will help people to take credit for variety of reasons.
- It will help poor people to get rid of the problem of moneylenders and their high rate of interest.
- It will be easy for the people to repay the loan.
Those having extra cash open a bank account in their name and deposit the surplus money there. Their money is safe with the banks and they get some interest rate on the amount they have deposited. Out of the total money deposited with the banks, 15% of it is kept as minimum cash balance to pay to the depositors who might come to withdraw money from the bank on any given day. Rest of the amount is used to extend loan to the borrowers.
This helps people to run and expand their business which will increase the individual income and finally the country’s income. Credit plays a positive role when the borrower is able to return the loan amount on time and also made some profit with the use of that money. For example: Salim, a shoe manufacturer took a loan from different sources to complete the order of 3000 pair of shoes, in the end he delivered the order, made profit and repaid the loan.