Provide better alternative to consumer. State shouldn't fight against it instead formalize it under institutional framework. One big example you may see history of micro financing in Bangladesh, Pakistan, etc.

Developing states may fail in some cases due to lack of capacity but that doesn't mean to stop trying.

WHY? Informal financing is a response to demand for financing that the formal sector fails to meet. It is a symptom of inadequate availability of credit. Much of the livelihood in the developing countries are found in the informal sector. Informal financing plays a significant role in these developing economies. Every component of the informal sector, including non-bank financing, is important in developing countries.

Paul Louangrath Yes I agree with you but informal financing represents a serious leakage of economic circuits and income redistribution. This is why informal situation is dangerous for any national economy.