Why do the poorest of the poor fall into a debt trap?
Answer & explanation
Correct answer: option 2
The correct answer is option 2: Due to the high-interest rate charged by the money lenders
The poorest of the poor often fall into a debt trap due to the high-interest rate charged by the money lenders. In many cases, these individuals rely on informal money lenders rather than banks or institutional investors, who tend to charge exorbitant interest rates, making it difficult for the borrowers to repay their loans and escape poverty.