Question

Given that a large number of people in our country are poor, does it in any way affect their capacity to borrow?

Answer 1

Yes, poverty significantly impacts borrowing capacity. It is because:

1. Poor individuals may lack valuable assets to use as collateral, making it more difficult for them to obtain loans.
2. A strong credit history is required for borrowing. Poor persons with limited financial transactions may not have a good credit record.
3. Lenders evaluate borrowers’ ability to repay using dependable income sources.
4. Poor individuals may have restricted access to conventional banking services.