The sectoral assessment for banking is at the heart of development issues in finance because of the central role of banking in the financial systems of most developing coun­tries. In addition to what can be quantified on the basis of available statistics, the fact­finding requires broad-ranging discussions with market participants, as well as with the regulators.10 An effective banking system will be characterized by considerable depth (measured, for example, by total assets); breadth in terms both of customer base (lending to a wide range of sectors and regions, without neglecting the needs of creditworthy bor­rowers in any sector or region) and of product range (maturities, repayment schedules,
flexibility, convenience, risk profile, and nonbanking products where permitted); and efficiency. Overhead costs, interest spreads, and interest margins give an indication of efficiency, though taxes and other requirements can substantially influence the spread, as explained below.

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