Concluding remarks
If one is to assess the efficacy of the banking liberalization using the economic efficiency standards of liberalized markets, then it was a failure. It did not bring down the cost of money, did not narrow intermediation spreads (the gap between bank borrowing, i.e., deposit rates, and lending rates), and did not increase the supply of loanable funds to the cash-strapped economic groups and sectors, including agri-business and venture capitalists/entrepreneurs. Under the relatively-constricted terms of financial liberalization, the new banks came in only to cater to the already competitive but still lucrative high-end corporate market.
This lack of potency can only be explained satisfactorily by the mangling of the terms and the intent of the banking liberalization law. To the extent that the law hewed closely to the preferences of the financial oligopolists, then it signifies another notch up their sleeves. To the extent, however, that new players have come in and may be able to offer significant competition in the future, then the law can be considered a skillful compromise as well as an opportunity for thorough-going financial openness. The future course of events is, of course, an empirical matter that could not be settled in this paper. One can only speculate and perhaps hope for a more competitive financial regime that can offer cheaper credit to all fund users but still able to afford investors with respectable yields and acceptable risks.
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