Contractual Relationships

As mentioned previously, a judicial system that ensures unambiguous and rapid enforcement of

71. Luz Maria Bassoco, Celso Cartas and Roger D. Norton, 'Sectoral Analysis of the Benefits of Subsidized Insurance in Mexico', in Peter Hazell, Carlos Pomareda and Alberto Valdes, Crop Insurance for Agricultural Development: Issues and Experience, The Johns Hopkins University Press, Baltimore, MD, USA, 1986, pp. 141-142.

72. Secretaria de Recursos Naturales, Honduras, 1990.

contracts is one of the factors that can most encourage the growth of private finance in rural areas, along with an appropriate framework for collateral. The strength of contractual relationships, of course, is a very basic concern and has implications in many realms of the economy other than financial transactions. As an illustration of its role, a common hindrance to development of non-traditional agricultural exports is the occasional lack of compliance on the part of some export brokers with the terms of their contracts with growers, and the lack of affordable legal recourse for the growers, especially the small-scale ones.

In addition to guaranteeing the reliability of contracts, it also is important to ensure that requirements for contracts not be specified in a way that unintentionally excludes many of the poor. For example, a requirement that the farmer read and assent to the agreement, and sign it, may discriminate against illiterate persons. In such circumstances, legal provision could be made for witnesses to read the contract to the signer and serve as co-signers, and for signature to take the form of a thumbprint.

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