Analyse the situation in which credit pushes the borrower into a situation from which recovery is painful.
Generated by claude-sonnet-4-6 · 2026-06-15 06:54 · grounding rag
Model Answer
When a borrower takes a loan hoping for income that does not materialise (e.g., crop failure due to pests), repayment becomes impossible. The debt grows, the borrower must take fresh loans, and is caught in a debt trap. To repay, they may have to sell assets like land, leaving them worse off than before.
Source: Chapter 3, Two Different Credit Situations (Swapna's Problem)
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Explanation
- The examiner wants you to cite a specific situation — Swapna's case is the textbook example used.
- Key terms to include: debt trap, inability to repay, debt grows, selling of assets.
- Avoid writing about Salim (positive credit) — the question asks only about the harmful situation.
- Two marks = two clear points: (1) why repayment fails + debt grows, (2) consequence (selling land / worse off).