Problem:
Gustavo is a young doctor who lives in a country with a relatively inefficient legal and financial system. When Gustavo applied for a mortgage, he found that banks usually required collateral for up to 300% of the amount of the loan. Explain why banks might require that much collateral in such a financial system.
Required:
Question: Comment on the consequences of such a system for economic growth.
Note: Please show the work not just the answer.