Systemic Implications of Financial Inclusion

This study contributes to the literature by analyzing the impact of financial inclusion (FI) on various bank risk dimensions, including systemic risk, which has been underexplored. It expands on recent research by examining not only the type of financial services, but also the source of FI, highlighting the role of non-commercial banks (NCBs).

The findings suggest that coordinating macroprudential policies with credit developments further reduces systemic risk by discouraging excessive risk-taking when banks’ capital is more at stake. Banks with stronger Basel capital ratios show reduced idiosyncratic risks, yet there is evidence that banks may relax these ratios to accommodate lending demands. These insights underscore the necessity for regulators to synchronize macroprudential policies with FI developments and consider NCBs’ role in financial stability.