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 .