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Financial Inclusion, Credit Booms, and Financial Stability Risk

Author

Listed:
  • Mr. Adolfo Barajas
  • Kensuke Sakamoto
  • Rasool Zandvakil

Abstract

Economic benefits of financial inclusion, meaning a broadening access of the population to financial services, have been studied extensively, but less is known about its potential effects on financial stability. We explore the complementarity between credit booms and episodes of rapid expansion of the borrower base, or “credit inclusion,” and find that the confluence of both helps to predict future financial distress. Rapid credit inclusion on its own does not usually portend future instability, but it is much more likely to do so when combined with a credit boom. These results can help to enhance the policymaker’s early warning toolbox.

Suggested Citation

  • Mr. Adolfo Barajas & Kensuke Sakamoto & Rasool Zandvakil, 2026. "Financial Inclusion, Credit Booms, and Financial Stability Risk," IMF Working Papers 2026/008, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2026/008
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