In developing countries, farmers typically borrow from informal lenders at high interest rates because

Question

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Farmers in developing countries generally have little collateral to offer formal financial lenders, making them less likely to be approved for loans. As a result, they often turn to informal lenders who may not require collateral but charge high interest rates. Factors such as government restrictions and risk aversion among formal lenders may also be at play, but the lack of collateral is the primary reason why farmers turn to informal lenders.

In Developing Countries, Farmers Typically Borrow from Informal Lenders at High