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This paper proposes an incomplete financial contract model and studies what factors affect the financing and locality of an informal financial market. We show that the size of an informal financial market increases with the entrepreneur's initial wealth, project's technological efficiency, probability of success of a good project, outside investor's wealth, and local factors like social conventions, culture and norms. The size decreases under a risk-free interest rate, or when a project's funds can be easily diverted for personal profit. [ABSTRACT FROM AUTHOR]