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.