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This article seeks to reconcile two currents in the literature, one showing the positive effect of financial development on economic growth, the other illustrating the adverse effect of financial crises. The baseline assumption is that, in the developing countries, the instability of financial development increases with the pace of financial development itself. This positive relationship between the two phenomena diminishes the positive impact of financial development on growth. The authors offer several theoretical arguments in support of this hypothesis, which they test successfully on a large sample of developing countries during the period 1966-2000. The analysis shows that a financial-liberalization policy aimed at promoting financial development should not be implemented irrespectively of the political and economic environment.