To answer these questions, we can draw on a large body of empirical (and theoretical) evidence that can give us guidance for financial sector reform. Let me start with the evidence we have on the link between financial development and growth. 1. Financial development and growth  In the 1990s, there was a widespread consensus that financial development fosters economic growth.
Developed financial sectors stimulate entrepreneurship, innovation, investment, and productivity. Many of these beneficial features of financial markets arise through equity finance. Through venture capital finance, for instance, new start-ups obtain not only financial resources but also management expertise. Yet, in much of the academic and policy debates, “financial development” has been associated with the share of credit intermediated through the banking system.