10th Class Social Science Money and Credit

  • question_answer 30) What are the reasons why the banks might not be willing to lend to certain borrowers?  


    A number of borrowers have no collateral to pledge against loans. Collateral is an asset that the borrower owns and pledges as a guarantee to the lender until the loan is repaid. The main demand for loans is for crop production. Repayment of the loan is crucially dependent on the income from farming. Whether loans would be useful or not, therefore, depends on the risks in the situation. That is why, banks have no interest to lend to such borrowers. Thus, the banks might not be willing to lend to those borrowers who have no collateral and whose repaying capacity is not guaranteed.  

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