Why do you think that the share of formal sector credit is higher for the richer households compared to the poorer households?

Certainly, here are the key points explaining the higher share of formal sector credit for richer households over poorer households:

– Higher Income Stability: Richer households boast higher and more stable incomes, meeting formal credit criteria and demonstrating better repayment capability.
– Asset Ownership as Collateral: Wealthier households possess valuable assets, serving as collateral for loans, easing their access to formal credit.
– Superior Financial Literacy: Affluent households often possess better financial knowledge, understanding formal financial systems, and navigating banking procedures effectively.
– Proximity to Banking Services: Residing in areas with better access to banks facilitates easier entry into formal credit systems.
– Regulatory Alignment: Formal lending requirements inadvertently align with the financial circumstances of wealthier households, excluding poorer ones due to income, asset, knowledge, and geographic disparities.