Comment by alex_smart
3 years ago
Rural India (unlike urban India) is relatively high trust environment. Everybody knows each other and there are lots of shared ethical values. But they still have to build their houses one brick wall at a time (lack of access to home loans) and be at the risk of financial ruin due to unpredictable life events (lack of access to insurance).
Urban India is a very low trust environment, but people still have access to things like home loans, insurance and capital markets (equity and loans).
> lack of good governance (bad or non-existant laws, corruption etc)
I agree that good governance is a necessity for development of financial markets, but not sure what it has to do with being a high trust or low trust society.
> lack of access to home loans [in rural india]
i would imagine that high trust but only within the village is not really high trust. Anyone outside the village who would've otherwise had the capital to lend to this village would not trust them to repay the loans, and perhaps would also not trust that the authorities would come in to enforce the collection of collateral (and in any case, if you forcibly evicted the original owners of a property for debts, the other villagers are probably not going to let you live there peacefully).
> but not sure what [good governance] has to do with being a high trust or low trust society.
Good governance allows high trust to exist, which allows many other things to exist as a precondition.