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CBSE Class 10 - Social Science: Money and Credit: Role of Money in an Economy - Formal and Informal Financial Institutions for Savings and Credit

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Question

Explain with an example, how credit plays a vital and positive role for development.

Solution

Credit plays a pivotal role in the economic and infrastructural development of a country. Credit institutions like banks and other informal establishments provide loans to credit seekers which may include private individuals as well as national governments. Such aid provides reinforcement for production and an increase in profits as well as employment. For example, developing countries like Bangladesh and Brazil borrow heavily from international financial institutions like World Bank. This provides the necessary financial push for their various infrastructure projects and industrial expansion initiatives.

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Solution Concept: Formal and Informal Financial Institutions for Savings and Credit.
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