The traditional concept of productive efficiency refers to microeconomic efficiency of firms in producing goods and services with given prices for their inputs. When applied to the financial system, this concept would simply be translated into intermediation cost or interest spread. However, one must approach productive efficiency from a broader perspective and define it as the ability of the financial system to provide finance at the lowest possible cost. This depends not only on the extent to which financial intermediaries minimize the cost of intermediation between the ultimate lender and the ultimate borrower, but also on the ability of the entire financial system to minimize the interest paid to the ultimate lender (the lender's interest rate).