The purpose of this paper is to provide a background survey of financial intermediation in small island developing economies. An attempt to achieve this aim is made here by examining the roles of financial intermediaries, measuring the efficiency with which they perform these roles, describing briefly the financial intermediaries operating in a sample of 11 small island developing economies, discussing the part played by foreign financial institutions, analysing advantages and disadvantages of alternative financial systems for these economies, and, finally, outlining the elements of a monetary policy strategy designed to promote effective and efficient domestic resource mobilisation and allocation in small island developing economies.