The global financial and economic crisis has cast serious doubts about the paradigm of market deregulation that dominated the last three decades. Although many developing countries, especially in Asia, became cautious following the Asian financial crisis, international financial institutions continued to advise developing countries to deregulate, albeit at a slower pace. However, this paper argues for re-regulating the financial sector with a view to preventing system-wide failures and fulfilling development needs. It highlights the importance of segregating different parts of the financial sector as well as controls over both deposit and lending rates, and the role of government-owned banks, especially for agriculture and SMEs.
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