Oscar Chiwira, Ruramayi Tadu, Brian Muyambiri3
Whilst the importance of financial inclusion has primarily been attributed to its strong links to poverty alleviation, of major interest recently had been attempts by researchers to also link financial inclusion with financial stability. The focus on the relationship between financial inclusion and financial stability is now shifting from merely believing that financial inclusion is linked to financial stability, but to exploring specific conditions under which financial inclusion can be used to foster financial stability. Whilst financial inclusion may be linked with financial stability in several ways, it is important to note that an effective financial regulatory framework still plays an important role in ensuring the stability of financial systems. By mitigating some of the risks that financial inclusion may pose to the financial system, financial regulation plays an intermediary role. A regulatory mechanism that would ensure that financial inclusion leads to financial stability would include regulation biased consumer protection, financial literacy and financial integrity. With policymakers and regulators looking for specific linkages that would ensure that financial inclusion leads to financial stability, such a regulatory mechanism may form the basis of an effective financial inclusion-financial stability framework that can be used in ensuring the attainment of such noble objectives.
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