Links between financial inclusion and financial stability

Abstract

Financial inclusion has become an important policy objective in recent years in a number of developing and developed countries. It is increasingly viewed as a tool of poverty alleviation, enables the poor to be risk averse and allows investment in health and education. However, including a large number of different groups of the population within the financial system if not accompanied by the appropriate regulatory measures could pose a risk to the country’s financial stability. Financial stability too has assumed increased importance in recent years especially since the financial crisis. A dilemma among policymakers is how to achieve a balance between the two and how to promote financial inclusion without destabilizing the financial system. In this study we explore the state of financial inclusion and financial stability in the context of BRICS.