In contrast, milder crises or the absence of crises—the third dimension of financial stability—is significantly negatively correlated with payments of individuals and firms, as well as account ownership, savings and credit of individuals.<sup>19</sup> However, as shown in Table 3, more stability (lower cost of crises) is significantly positively correlated with the inclusion of firms in savings. In contrast, increasing account ownership among individuals, use of electronic payments (including for internet purchases), and drawing on consumer credit are associated with greater probability, and higher cost of crises.

Disaggregating the **_resilience_** dimension of financial stability into bank capital, liquidity, and NPL ratios indeed reveals a number of significant correlations, both negative and positive, and suggests that there are more nuanced interlinkages between inclusion and the sub-dimensions of financial resilience. While capital and liquidity ratios show similar interlinkages to those estimated for crises overall, low NPL ratios show significant positive correlations with greater inclusion in account ownership, electronic payments and credit—more so for individuals than firms.

Disaggregating the **_volatility_** dimension of financial stability into the variability of lending rate, credit growth, deposit rate, and deposit growth also reveals rich interlinkages between financial inclusion and the sub-dimensions of financial volatility. The volatility of lending rate and credit growth both show significant negative correlation (trade-offs) with financial inclusion, in particular with account ownership, electronic payments, savings, and credit. We also find one negative association of life insurance with credit, which could reflect the link between required insurance of mortgages and the borrower’s repayment capacity in higher income countries.<sup>20</sup> These estimated interlinkages are thus consistent with those for crises, capital and liquidity. However, they are very different from the interlinkages estimated for the volatility of deposit rate and deposit growth. With the latter, financial inclusion shows significantly positive association for accounts, payments, savings, and credit—again more so for individuals than firms, which could reflect differences in the quality of the measures of inclusion for individuals (Findex) and firms (Enterprise Surveys). For instance, our finding of a significant correlation (of about 0.4) between the volatility of deposit growth and the use of deposits by individuals is consistent with the finding of Han and Melecky (2013) that a 10 percent increase in the use of deposits can reduce deposit withdrawal rates in stress times by about 5 percentage points.

We do not detect any significant positive effect of insurance on volatility and financial stability at large. Although non-life insurance appears to be associated with decreasing volatility of credit, relatively noisy data and limited country coverage prevent us from drawing a clear inference.

Overall, the results suggest that in normal times, financial inclusion aids financial stability, especially by decreasing through-the-cycle expected losses and costs of business for banks (recall the results for NPLs), and by lowering the volatility of deposit growth and deposit rates. However, for the volatility of credit, capital, and liquidity buffers, as well as for outright crises, financial inclusion could endanger financial stability because of its potentially negative implications for unexpected losses.

> 19 Note that account ownership and credit are related, as getting credit from an institution often requires the prospective borrower to open an account with the prospective lender. Use of electronic payments with such account then follows. Indeed, account ownership, the use of debit cards, and the use of Internet or electronic payments are highly positively correlated (Annex 1).

> 20 Note that the insurance sample is much smaller than for other services, and mainly includes higher income countries reporting to the IMF’s Financial Access Survey.

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