## Financial Inclusion: Can it Meet Multiple Macroeconomic Goals?

_Staff Discussion Notes, September 15, 2015_

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## Bibliographic details
- Authors: Ratna Sahay, Martin Cihak, Papa M N'Diaye, Adolfo Barajas, Srobona Mitra, Annette J Kyobe, Reza Yousefi
- Published: September 15, 2015
- Series: Staff Discussion Notes
- DOI: https://doi.org/10.5089/9781513585154.006

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### Summary findings
- Using several recently available global datasets, the Staff Discussion Note examines macroeconomic effects of financial inclusion.
- Significant benefits to economic growth from financial inclusion are identified.
- The benefits diminish as financial inclusion and depth become large.
- Broadening access to credit can compromise economic and bank stability in countries with weak bank supervision.
- Other forms of financial inclusion—such as access to and use of bank accounts, branches, and ATMs—do not hurt stability and can be promoted extensively.
- Gaps in financial inclusion are associated with economic inequality, but the association appears relatively weak.

### Analysis and interpretation
- Financial inclusion contributes positively to economic growth, but marginal gains decline at higher levels of inclusion and financial depth.
- Credit expansion poses stability risks conditional on the quality of bank supervision; weak supervision increases the probability that broader access to credit will undermine economic and bank stability.
- Non-credit channels of inclusion (account ownership, branch and ATM access and usage) are shown to be benign with respect to stability and thus represent feasible avenues for large-scale promotion.
- The relationship between financial inclusion gaps and inequality exists but is relatively weak, suggesting complementary policies may be needed to address inequality directly.

### Policy recommendations (implied by findings)
- Promote broad access to and use of bank accounts, branches, and ATMs as scalable forms of financial inclusion that do not compromise stability.
- Exercise caution in policies that rapidly broaden access to credit in environments with weak bank supervision; strengthen supervisory capacity before large-scale credit inclusion initiatives.
- Recognize that expanding financial inclusion alone may have limited effects on reducing inequality; combine inclusion efforts with targeted distributional or social policies.

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_Source: https://www.imf.org/en/publications/staff-discussion-notes/issues/2016/12/31/financial-inclusion-can-it-meet-multiple-macroeconomic-goals-43163_