Which is true, but there's another angle that needs discussing - that of a high-trust society vs low-trust society.
In all places where there are well functioning financial markets, there exists a high trust society. This trust is the foundation on which the financial markets exist.
So in poorer countries where such financial markets don't exist (or don't serve the people), it's not because they've chose not to have it, but that individual actors cannot trust that the system is fair and is rules based. So the problem isn't the lack of financial markets (which is a symptom), but that of a lack of good governance (bad or non-existant laws, corruption etc).
Urban India is a very low trust environment, but people still have access to things like home loans, insurance and capital markets (equity and loans).
> lack of good governance (bad or non-existant laws, corruption etc)
I agree that good governance is a necessity for development of financial markets, but not sure what it has to do with being a high trust or low trust society.
i would imagine that high trust but only within the village is not really high trust. Anyone outside the village who would've otherwise had the capital to lend to this village would not trust them to repay the loans, and perhaps would also not trust that the authorities would come in to enforce the collection of collateral (and in any case, if you forcibly evicted the original owners of a property for debts, the other villagers are probably not going to let you live there peacefully).
> but not sure what [good governance] has to do with being a high trust or low trust society.
Good governance allows high trust to exist, which allows many other things to exist as a precondition.
Visit a part of the world where most people do not have access to home loans, health insurance etc. and you will not have to ask how mere redistribution of risk and capital adds to productivity ever again. (I happen to have been born one such part of the world.)