ABSTRACT
Establishing appropriate financial sector policies is of paramount importance to policy makers because financial intermediaries provide services- facilitat ing transactions and risk management, mobilising and allocating capital, and exerting corporate governance - that are necessary for economic growth. 2 More 'efficient' financial systems provide better financial services, and thereby provide a bigger boost to growth than less efficient financial systems. If inherent characteristics of the market for financial intermediary services suggest that unregulated markets will inadequately supply these crucial services, then governments have a responsibility to consider interventions to improve the provision of financial services. Government policies, however, often play the principal role in reducing the quality of financial services and in obstructing financial development. Consequently, policy makers have the difficult task of enacting interventions that ameliorate market failures, while avoiding government interventions that negatively affect the provision of financial services.
