Credit plays a vital and positive role in the following ways.
(a) It helps people from all walks of life in setting up their business, increase their income and provide support to their family needs.
(b) Credit makes it possible for the people to own or construct their own house and get relief from monthly rent.
(c) People often avail themselves of credit to purchase luxury items vehicles, A.Cs, etc., which further raises their standard of living.
(d) Credit enables us to invest in human resource. People take credit for education, training, etc. which allows enrichment of human resource.
(e) For example, Salim availed credit facility to meet the working capital needs of population. It helped him to meet the ongoing expenses of production, complete production on time, thereby, increasing his income.

A Self-Help Group is an innovative way to organise rural and urban poor, particularly women. The following points sum up the functioning of Self-Help Groups.
(a) Typically, a SHG has 15-20 members belonging to one neigbourhood. They meet and pool their savings regularly. Savings per member may vary as per the capacity of the member.
(b) The group advances loans to its members at a nominal interest rate without any collateral.
(c) Most of the important decisions regarding savings and loan activities are taken by the group members themselves. The group decides whether loan is to be granted or not, purpose, amount, interest to be charged, repayment schedule etc.
(d) It is the group that is responsible for the repayment of the loan. In case of non-repayment by any member, all the members seriously follow up the repayment.
(e) The regular meetings of the group provides a platform to discuss and act on a variety of social issues such as health, nutrition, domestic violence, etc.

 Banks and cooperatives can help people in obtaining cheap and affordable loans. This will help people to grow crops, do business, set up small- scale industries or trade in goods and also help indirectly in the country's development. They should do so, so that relatively poor people do not have to depend on informal sources of credit (money lenders).

The credit activities of the informal sector should be discouraged because:
(i) 85% of loans taken by the poor households in the urban areas are from informal sources. There is no organisation that supervises the credit activities of lenders in the informal sector.
(ii) Informal lenders charge very high interest on their loans. They try to charge more and more interest on their loans as there are no boundaries and restrictions.
(iii) Higher cost of borrowing means a larger part of the earnings of the borrowers is used to repay the loan.
(iv) In certain cases, the high interest rate for borrowing can mean that the amount to be repaid is greater than the income of borrower. This could lead to increasing debt and debt trap, therefore the credit activities of the informal sector should be discouraged.

Cheap and affordable credit is crucial for a country's development because:
(a) More lending would lead to higher incomes and encourage people to invest in agriculture, engage in business and set up small industries.
(b) Cheap credit will enable more investment. This leads to acceleration of electronic activity.
(c) Cheap credit would also weaker sections of society to access formal sector of leading and get rid of from informal moneylenders.
(d) Affordable credit would also end the cycle of debt trap.
(e) Cheap and easy terms of credit would inspire better investment in technology and thus increase competition.

(a) Banks provide loans after collateral and documentation securities, which generally the small farmers failed to comply with. Therefore, banks are unwilling to lend loans to small farmers.
(b) There are several informal sources of credit like landlords, moneylenders, traders, relatives and friends etc.
(c) Terms of informal credit can put the small farmers into debt-traps. Higher rate of interest and unfavourable conditions expiate farmers by the situation of multiple loans.
(d) Farmers can get cheap and safe loans from formal credit providers i.e., banks and cooperative societies.

Things exchanged for other things without the use of money are known as barter system. The barter system laid the foundation of trade but trade was limited to the bounds of a village or town. Hence, in a barter system when both the parties agree to sell and buy each other's commodities, it is known as double coincidence of wants. Whatever commodity a person desires to sell is exactly what commodity the other wishes to buy. Without double coincidence of wants exchange of goods is not possible. Therefore, it is an essential feature. Money eliminates the need of double coincidence of wants. One can easily exchange their goods in exchange of money and later on pay money for the desired commodities. Money acts as a intermediate in the process of exchange, it is called as medium of exchange.