Question : Assertion: Institutional sources of credit promote financial inclusion in rural areas.
Reason: They provide access to formal financial services to farmers and rural entrepreneurs.
Option 1: Both assertion and reason are true, and the reason is the correct explanation of the assertion.
Option 2: Both assertion and reason are true, but the reason is not the correct explanation of the assertion.
Option 3: Assertion is true, but the reason is false.
Option 4: Assertion is false, but the reason is true.
Correct Answer:
Both assertion and reason are true, and the reason is the correct explanation of the assertion.
Solution : The correct option is (a) Both assertion and reason are true, and the reason is the correct explanation of the assertion.
Institutional sources of credit do promote financial inclusion in rural areas, and the reason for this is that they provide access to formal financial services to farmers and rural entrepreneurs.
In many developing countries, rural areas often have limited access to formal financial services, such as loans, savings accounts, and insurance. Institutional sources of credit, such as government-supported financial institutions or microfinance institutions, aim to address this issue by extending their services to rural areas.
These institutions offer financial products tailored to the needs of farmers and rural entrepreneurs, including loans for agricultural activities, small businesses, and other income-generating initiatives. By providing access to formal financial services, institutional sources of credit help promote financial inclusion, allowing rural communities to participate in the formal economy, build assets, and improve their economic well-being.
Therefore, the assertion that institutional sources of credit promote financial inclusion in rural areas is true, and the reason that they provide access to formal financial services to farmers and rural entrepreneurs is the correct explanation for this assertion.
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