Money and Credit

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• Questions
• Summary

Credit (i.e. giving loans) refers to an agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payments with interest. Credit plays a vital and positive role in the society. It can put the borrower into two different credit situations. We can understand it by the following examples:

Example 1: 
Saleem obtains loans to meet the needs of production. The credit helps him to meet the need of ongoing expenses of production, complete production in time and thereby increase his earnings.

Sometimes, credit, instead of helping people, pushes them into a debt trap. 
Example 2:
In Swapana’s case who is a farmer, the failure of crop made loan repayment impossible. Credit, in this case, pushes the borrower into a situation from which recovery is painful.