ABSTRACT
This chapter attempts to expand the current conceptualization of bank rent as an effective mode for banking system development in developing countries by integrating three essential components – namely, price, operating, and macroeconomic rent opportunities. The creation of rent opportunities for the banks in developing countries is a challenging task. Even though larger interest spreads can be created with ease using financial restraints, the ability of those interest spreads to generate adequate profits for the banks depends on a variety of other factors that extends far beyond those specified in the conventional bank rent models. The financial restraint model provides a strong framework for developing banking systems, its applicability in developing countries can be debated on a number of aspects. Given the inherent issues associated with the existing models and their limited applicability in developing countries, proposes a new model that incorporates a broad set of factors that can affect the bank rent opportunities.
