A good financial sector is one that is extensive in terms of value and volume of transactions and which has diversified financial services to serve a spectrum of development activities and different segments of a society.

An effective financial sector has a legal and regulatory institutional framework that is consistent, and flexible to accommodate micro-financing institutions, leasing and venture capital activities and development of financial institutions.

A financial sector should be credible and have a strategy for savings mobilization – accessibility to all segments of society, and diversified financial instruments.

The financial sector should also have the capacity to undertake a macro and micro economic analytical work to maintain and sustain macroeconomic stability with stable exchange rates, interest rates and controlled inflations that gives people confidence to save and invest.

A sector needs a credit delivery system that reaches beyond the major towns and capital cities to include the promotion of policies that valorize assets such as land and buildings for securitization purposes.

A sector should have efficient, secure and swift payment systems that encourage acceptance of non-cash modes of payment.

Finally, a sector must contribute to the strengthening and the promotion of business and training institutions to build a critical mass of high quality professionals capable of effectively management.

In my opinion, a financial sector that is not inclusive of the poor (which in most cases in Africa constitute the majority) will not and cannot be a sound, dynamic sector.

The percentage of the population that has access to a savings account in a formal financial institution (i.e., one that is overseen, directly or indirectly by government regulators) would be a pretty useful indicator. Not everyone wants or needs a loan, but if the financial sector is reaching out and extending savings services to the bulk of the population, that would be beneficial.

My suggestion would be to use the percentage of the households in the country/region with access to institutional financial services (measured with account in a financial institution, credit line, line of credit or credit card).

A good financial sector is the one that earns the trust from the population and can be easily accessed both by poor and rich without any sex, age, race, nationality, and religion intolerance.

A good financial sector has all the segments of financial system including banks, leasing companies, insurance agencies, auditing companies and others interrelated and directed towards increasing the quality of serving the population.

A good financial system is the one that uses technology for efficient transactions, including electronic banking and e-commerce to ease the access to funds, including credit and debit cards and correspondent relations with international financial systems.

A good financial sector is the one that has stable and legislative bases for all financial transactions where the population can generate sustainable income, invest, and transfer funds with confidentiality and security.

A good financial sector is the one that can make the appropriate adjustments according to global financial fluctuations in both times of crisis and progress.

A good financial system (public and commercial) can effectively manage the fund transfers from saving into credits, and from tax collections into government expenditures.

To me the factor that most indicates how well a country's financial sector is meeting the needs of its people is the depth of it's capital markets and commercial banking sector. Depth refers to soundness (capital adequacy), strength (portfolio quality and product spread), the ability to generate and allocate capital (savings) effectively, a cadre of trained professionals working in the industry, and a regulatory base which operates on the basis of international standards and which adheres to the rule of law (especially as this relates to respecting contracts and providing legal recourse for disputes). Not many developing countries possess all or many of these attributes. Too much of their financial sectors are state owned/controlled. Patronage and corruption are therefore more highly prevalent. And various customer segments are thus underserved, especially low-income groups.

One other major indicator of a country's financial health is whether or not the legal system provides for universal access to capital. Too many countries have not provided the legal/regulatory base which allows citizens to realize the capital stored in their assets, especially hard assets such as real estate which cannot be registered and therefore pledged as collateral except in an underground economy which by nature is limited and inefficient. The amount of wealth stored in such assets, especially those controlled by the poor, is often a major part of an LDC's economy yet often lies fallow as a source of liquidity and economic growth.

Development has four (4) main issues: education, employment, health and access to credit. Even though the microfinance industry has been growing in most countries around the world, the percentage of those with access to credit is still very low. So one valid and reliable indicator will be the percentage of financial services devoted to the Micro and Small Enterprises in relation to a country’s GNP.