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What are the reasons why the banks might not be willing to lend to certain borrowers? - Social Science

Answer in Brief

What are the reasons why the banks might not be willing to lend to certain borrowers?

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Solution

Banks might not be willing to lend to people who cannot provide collateral, who do not have steady earnings or jobs, and who have a history of non-repayment of loans. In such cases, banks do not have a guarantee as to whether or not the loans will be repaid by the persons concerned. It has to be understood that banks only mediate between those who have surplus money and those who need money. Banks in fact borrow the money deposited with them and lend it out to persons requiring money. They would thus be unwilling to advance the money to individuals from whom repayment is uncertain.

Concept: Informal Institutions - Local Money Lenders, Landlords, Self Help Groups, Chit Funds and Private Finance Companies
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