This paper investigates the relationship between creditors' protection - when it is directly determined by debtors' punishment - and the credit market development. The current literature stresses that creditor protection through the legal system is associated with a broader credit market in a monotone way. In this paper we show that if the creditors' protection is directly determined by the debtors' punishment there will be a non-monotonic relationship between the creditors' protection (or debtors' punishment) and the size of the credit market, where the optimal level of protection should be neither too high nor too low.