1. What is Credit? 💳🔍

• Credit (loan) is an agreement where the lender provides the borrower with money, goods, or services in exchange for a promise of future payment 📅💵.
• It is widely used in day-to-day transactions, helping individuals and businesses meet their financial needs before they have the full funds available 🏦.
• Credit can be in the form of personal loans, business loans, or even trade credit where businesses receive goods or services now and pay later 🔄📈.
• Credit helps stimulate economic growth by enabling people to make purchases or investments they may not otherwise be able to afford 🚀.
• It is also used to smooth consumption, allowing people to buy things now and pay for them over time, especially for major purchases like homes or cars 🏠🚗.

2. Salim’s Example: Using Credit for Working Capital 🧵💰

• Salim, a shoe manufacturer, receives a large order for 3,000 pairs of shoes for the festival season 🎉.
• To complete the order, Salim needs extra funds for raw materials and wages for extra workers 👞🧑‍🏭.
• He obtains credit in two ways:
  • First, by asking the leather supplier for leather now and promising payment later 🐄.
  • Second, by securing an advance payment from the large trader for 1,000 pairs of shoes to be delivered by the end of the month 💸.
• The credit allows Salim to meet production deadlines, manage cash flow, and fulfill large orders without needing to wait until the final payment is received 📅⚡.
• By the end of the month, Salim delivers the order, earns a profit, and repays the loans 🏆.
• Salim’s ability to use credit boosts his business and reputation, as he can take on more orders and scale operations efficiently 📈💼.
• Without credit, he would likely be unable to fulfill large orders or expand his business, limiting growth potential 🚧.

3. Role of Credit in Business Expansion 📊💡

• In Salim’s case, credit helps him meet working capital needs, complete production on time, and increase earnings 💼.
• Credit serves as a vital tool for expanding production and growing a business 🏭.
• It enables the business to continue functioning smoothly, even before the final revenue from sales is received 💵.
• With access to credit, businesses can take advantage of new opportunities, such as securing large orders or entering new markets 📈🌍.
• Credit helps businesses manage seasonal fluctuations in demand, allowing them to continue operations without the constraint of having all funds upfront 📅🔄.
• By using credit wisely, businesses can increase their competitiveness and stay ahead in the market 🚀📊.

4. Swapna’s Problem: The Debt Trap 🚜💸

• Swapna, a small farmer, borrows money to grow groundnut on her land 🥜🌱.
• Due to an unexpected pest attack, her crop fails, and she is unable to repay the loan 🐛🚫.
• Swapna’s debt increases over time, and next season she takes another loan to cover the previous one, hoping for a better harvest 🌾💔.
• The crop failure and mounting debt push her into a debt trap, where repayment becomes impossible 🏚️.
• The inability to repay the loan leads to a vicious cycle of borrowing and debt accumulation, which is difficult to break 🔄💳.
• Debt traps like Swapna’s are common in agricultural sectors, where unpredictable events such as pests, floods, or droughts can cause major financial distress 🌧️💔.
• The lack of support systems, such as insurance or emergency credit, exacerbates the problem and leaves farmers vulnerable to financial ruin 🌾⚠️.
• Credit in this case, instead of helping Swapna improve her earnings, left her worse off, forcing her to sell part of her land to repay the loan 🏚️💔.