THE ALLOCATIVE EFFICIENCY OF THE FORMAL VERSUS THE INFORMAL FINANCIALSECTOR

An important reason for the disappointing effects of the financial ref orm programmes, as part of the structural adjustment programmes in sub -Saharan Africa, stems from the strong focus of the adjustment program mes on the formal banking sector. A financial reform programme which d oes not explicitly employ the knowledge of the informal financial sect or may lead to a sub-optimal allocation of resources and hence may not improve the quality of investments.