Since the 1990s, economists have begun to pay close attention to the role of law and legal institutions in facilitating economic growth. In particular, the ‘law and finance’ view asserts that laws offering investors effective protection against expropriation are able to stimulate access to finance for firms. In the absence of effective legal protection, firms are forced to rely on informal mechanisms such as reputation in order to secure finance. This creates a barrier to entry, making it difficult for entrepreneurs to access the formal sector of the economy.
