Financial Inclusion and the Linkages to Stability, Integrity and Protection: Insights from the South African Experience
Both country level policy makers and increasingly also international financial sector standard-setting bodies simultaneously pursue the objectives of financial inclusion (I), financial stability (S), financial integrity (I), and financial consumer protection (P) (collectively I-SIP). There is good reason to believe that, at the level of outcomes, I-SIP objectives may be mutually reinforcing and interdependent. In practice, at the policy level, the linkages are less well known and policy makers face choices that are often unnecessarily framed as tradeoffs. This report introduces and develops the concept that a proportionate approach to any financial inclusion measure (and specifically to its regulatory and supervisory design and implementation) should seek to optimize the I-SIP linkages: maximizing synergies and minimizing tradeoffs and other negative outcomes. Based on analysis of South African experience, the report proposes a methodology for optimizing the I-SIP objectives.