Most loans from informal lenders carry a very high interest rate and do little to increase the income of the borrowers. Thus, it is necessary that banks and cooperatives increase their lending particularly in the rural areas, so that the dependence on informal sources of credit reduces.
Secondly, while formal sector loans need to expand, it is also necessary that everyone receives these loans. It is important that the formal credit is distributed more equally so that the poor can benefit from the cheaper loans.
