People obtained loans from various sources. The various sources of loans are categorised into :
(i) Formal sector loan.
(ii) Informal sector loan
The formal sector loans are given by banks and cooperatives. The informal lenders include money lenders, traders, employers, relatives, friends etc.
Poor people and workers get much of their loans from the informal sectors, which is not only exploitative but also charges very high interest rate. These make the poor people and workers to fall back in poverty.
The measures to make formal sector loan beneficial for poor farmers and workers are as follows :
(i) The formal sector like, banks and cooperatives should lend more to poor people and workers, particularly in rural areas.
(ii) The formal sector should provide cheap and affordable credit.
(iii) The formal sector should ensure that everyone receives loans.
(iv) Providing Self Help Group (SHG) bank linkage.
(v) There should be more number of cooperatives and banks in rural areas.