4.3.4. Support a Strong Rule of Law and Security & Governance
A necessary condition for an effective financial marketplace is rule of law, the assurance that property rights are secure and that contracts will be enforced. Additionally, a secure environment disincentives corrupt behavior and attracts investors who would otherwise be hesitant to invest in an environment that was unstable and unpredictable. USAID can support security & governance in the financial market via providing advisory support in new regulation, and providing support for electronic systems that can register property, track financial accounts, and maintain judicial independence. Uncertainty about the ability to rapidly enforce a financial contract in the event of a default increases the risk premium and thus the transaction costs (Source: Mobilizing Private Finance for Development: A Comprehensive Introduction).
- Ability to have commercial disputes resolved in a timely manner
- Ability to recover and sell property pledged as collateral
- Ability to resolve bankruptcies in a timely manner
MUST HAVE’S, CRITICAL POINTS, OR QUESTIONS TO CONSIDER