ABSTRACT
This chapter reviews the literature on the role of corruption in financial sector development, with a view to providing greater understanding of the channels through which corruption affects financial sector development. The studies reviewed can be broadly categorised into (i) those which put forward compelling arguments in favour of the ‘sand the wheels’ hypothesis, (ii) those which provide support in favour of the ‘grease the wheels’ hypothesis and (iii) those that fall outside of these two categories. The conclusions of all studies provide strong support for the need to address the issue of corruption to promote greater financial sector efficiency.
