Private sector firms had traditionally been evaluated using financial analysis tools such as discounted cash flow. As the recent global financial crisis illustrated, such tools have failed. Further, conventionally, for private industry the owners embark on a project with a view to making profits and they bear the risks. As we have seen recently, particularly in capitalist USA, this is no longer true. When the private industrialists failed, the whole society is burdened with the loss. Hence, more appropriate methods ought to be used for the evaluation of private sector projects. One such method is Social Cost Benefit Analysis (SCBA). SCBA has traditionally been a tool of welfare economics to appraise the efficient use of the country’s resources from the view point of its society. Generally SCBA is used for the evaluation of public sector projects. It differs from traditional financial analysis tools where all relevant costs and benefits are measured in observed market prices. In SCBA, the prices are corrected for possible market distortions. In line with globalization, advocates of financial liberalization urged developing economies like Malaysia to liberalize her financial sector using the price mechanism to allocate resources, as this is supposed to raise allocative efficiency and enhance the role of the financial institutions as intermediaries, thus help ensure that more productive investments are financed. One of the key reforms of financial liberalization is the freeing of interest rate regime. To test the claim made in support of financial liberalization, for the case of Malaysia, the authors had unprecedentedly used SCBA. A sample of manufacturing firms was collected to determine whether loans were allocated to the more efficient firms after the country adopted financial liberalization. Basically, the method here is to conduct an ex-post evaluation of loans given out by the banking institutions to the firms (selected as the sample) to see on hindsight, whether credit and loans were allocated to the firms that gave rise to positive net benefits (or social profits). The social profits of these firms were then analyzed according to different strata and time period to gauge the efficiency in bank loans utilization. Total costs incurred and benefits generated by these firms over the years were calculated according to Little & Mirrlee’s methodology . The results of these analyses constitute the basis for the authors to conclude that financial liberalization has not improve allocative efficiency in Malaysia for the time period in which the study was conducted.