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Survival Of The Fittest

There have always been two faces to the outlook on finance that people have had. The various opinions that the public have formed over so many years have shown clearly the stark difference between these two types of finance that is available to people. The two type being formal and informal finance that is managed in very different ways and manners. But they do each have success in their own ways so to speak. Are they one and the same or are they two opposite ends?

Informal finance
Informal finance typically consists of like a licensed moneylender who tends to provide personal loans to individuals with rates of interest being higher than normal. While most of them would argue that the higher rates of interest that they charge is justified because of the risk that they take upon themselves in running such a business because most of the time such people provide loans to those who are under privileged or people like impulsive shoppers and gamblers who cannot justify their need for a loan.

Such people who have a poor credit history will not be able to approach a professional institute for their financial needs try to seek the best moneylender in Singapore for the immediate cash they require. But most countries require that such people also run a legal business and they have to obtain a registration in order to run the business. These people usually don’t have the necessary funds to back them up and they tend to provide loans of small amounts but they can provide an immediate solution to the customer’s financial needs and so they tend to have some success in this field.

Formal finance
These consist of banks and other professional institutes that are capable of sanctioning large loans to individuals. There is a certain procedure that needs to be followed to make the transaction legalized. And it may take days and months for the loan to be approved. Which serves as a disadvantage to people in need of money immediately. Banks usually have the fund that are required to be successful in this field but they are unable to provide it effectively to the people in need of it. And there is also the added disadvantage of the fact that some people are not eligible enough to obtain a loan from the bank because they cannot provide enough security to the bank as a backup plan.

Therefore it’s no surprise that we find to date both formal and informal finance exists in the society and that most people have their feet placed in both directions.

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