AGREEMENT AND TRUST FOR THE RISK MANAGEMENT FAILURES IN THE INFORMAL FINANCIAL TRAN SACTIONS IN THE AGRICTURAL SECTOR IN ALGERIA

Abstract

Produce new mechanisms for managing defaults risks, which are efficient and less cumbersome for farmers, is one of the major challenges of rural finance systems development in developing countries, can provide ideas on what type of innovations. This paper presents the results of an empirical study of these mechanisms and their functioning in case of the transactions of production association - one of most widespread informal financing in the agricultural sector in Algeria. Farmers and their partners in such transactions, base their economic decisions on contractual mechanisms and trust. The analysis of these mechanisms shows that design and appropriate management of contractual relationships is the key of the emergence of the trust that once acquired, it contributes to the well functioning and efficiency of informal financing transactions.