Financial Inclusion and Business Cycles

25 Pages Posted: 22 May 2020

Date Written: 2020


The current debate on financial inclusion pays little attention to whether financial inclusion is pro-cyclical with the fluctuating business cycle. This article investigates the relationship between financial inclusion and the business cycle. The findings reveal that the level of savings and the number of active formal accounts are pro-cyclical with fluctuations in the business cycle. Also, the level of savings by adults particularly for women and poor people decreases during recessionary periods while the number of active formal accounts decline for the adult population especially for women during recessionary periods. The findings also reveal that not all indicators of financial inclusion are pro-cyclical with fluctuating business cycles. The implication of the findings is that poor people and women will exit the formal financial sector during a recession, as banks become unwilling to lend money to poor individuals and households during bad times, and this will lead to financial exclusion and vice versa. Policy makers seeking to increase the level of financial inclusion should focus on the timing of financial inclusion policies along the business cycle as the findings suggest that it might be more difficult to achieve financial inclusion objectives during recessions.

Keywords: financial inclusion, pro-cyclicality, business cycle, financial crisis, access to finance, economic cycles, GDP, formal account ownership, borrowing, savings

JEL Classification: D14, D18, G21, G28

Suggested Citation

Ozili, Peterson K, Financial Inclusion and Business Cycles (2020). Available at SSRN: or

Peterson K Ozili (Contact Author)

Central Bank of Nigeria ( email )

Abuja, 0187

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics