The Nexus of Financial Inclusion and Financial Stability: A Study of Trade-Offs and Synergies

45 Pages Posted: 19 Jul 2016

See all articles by Martin Čihák

Martin Čihák

International Monetary Fund (IMF)

Davide Salvatore Mare

World Bank - Development Research Group (DECRG); University of Edinburgh - Business School

Martin Melecky

World Bank

Date Written: June 21, 2016

Abstract

Policy makers and regulators have devoted much effort to reforms aimed at improving financial stability in response to lessons from the 2007-09 crisis. At the same time, much effort has also been directed to promoting greater financial inclusion as an enabler of equal opportunity. To some extent, these endeavors have been exerted in silos, neglecting the possibility that financial inclusion and financial stability could be significantly intertwined, positively or negatively. If there are synergies or trade-offs between inclusion and stability, policy decisions must be informed, and the policy setting, design, and implementation adjusted accordingly. This paper (i) discusses the relationship between financial inclusion and stability, (ii) illustrates empirically interactions between the two financial sector outcomes, and (iii) outlines policy challenges stemming from these interactions.

Keywords: Economic Insecurity

Suggested Citation

Cihak, Martin and Mare, Davide Salvatore and Melecky, Martin, The Nexus of Financial Inclusion and Financial Stability: A Study of Trade-Offs and Synergies (June 21, 2016). World Bank Policy Research Working Paper No. 7722. Available at SSRN: https://ssrn.com/abstract=2811371

Martin Cihak (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

Davide Salvatore Mare

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

University of Edinburgh - Business School ( email )

Edinburgh, Scotland
United Kingdom

Martin Melecky

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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