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    Question

    Which of the following is a risk faced by banks when

    lending to MSMEs due to information asymmetry?
    A Credit Risk Correct Answer Incorrect Answer
    B Market Risk Correct Answer Incorrect Answer
    C Currency Risk Correct Answer Incorrect Answer
    D Liquidity Risk Correct Answer Incorrect Answer
    E Operational Risk Correct Answer Incorrect Answer

    Solution

    Credit Risk arises because MSMEs may lack proper financial records, audited statements, or credit history, leading to difficulty in assessing their repayment capacity. This makes MSME loans riskier for banks.

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