Financial Inclusion and Financial Stability: Current Policy Issues
This paper highlights the role of financial inclusion in enhancing financial stability. It gives an overview of current trends in financial inclusion and presents policy recommendations in the context of the global economic crisis.
The paper traces the evolution of financial inclusion and discusses indicators of inclusion. It presents microeconomic and macroeconomic evidence on the relationship between poverty and financial inclusion. The paper highlights financial inclusion policy innovations and illustrates them with success stories from around the world. The innovations discussed include:
- Agent banking;
- Mobile payments;
- Diversifying providers and adapting banking regulations to microfinance;
- Reforming state-owned banks;
- Consumer protection and education;
- Reducing documentation barriers and providing financial identity to customers.
The paper examines trade-offs and synergies between financial inclusion and stability. It observes that technological innovations, viable business models and policy reforms have made it possible to expand financial access without compromising financial stability. The paper states that the current economic crisis offers an opportunity for policymakers to advance financial inclusion policies that promote economic resilience.
