Safeguarding Financial Inclusion During Crises : Lessons for Policymaking

Overview & Synopsis

Systemic crises pose pressing threats and jeopardize economic growth and prosperity. These recurrent events disproportionately affect vulnerable households as well as micro-, small-, and medium-sized enterprises (MSME), all of whose limited financial assets and restricted access to finance hinder their ability to cope with external shocks and manage uncertainty. Such events not only undermine financial stability; they also can reverse the hard-won gains of financial inclusion as well as deepen inequality. In typical response, financial safety-net authorities (FSNA) draw on a comprehensive toolkit—one which, depending on their objectives, may include macroeconomic stabilization policies and financial sector-specific interventions. This Working Paper represents an early effort in this area, showcasing the fact that a crisis response to restore financial stability can be effectively aligned with efforts to maintain financial inclusion. Drawing on an empirical analysis of 58 countries, microdata from more than 300,000 individuals, surveys targeting central banks, and real-world case studies from Indonesia, Lebanon, the Philippines, and Thailand, this document provides evidence that inclusion, indeed, can be safeguarded and strengthened without compromising financial stability. This will not occur by chance; it will require authorities to act with intention and in a coordinated manner.