such as those enabled through the alliance for financial inclusion ( afi ) network make such exchanges possible. 3 ) engagement with global bodies such as standard setting bodies and international agencies as a productive means to promote a cohesive and consistent financial inclusion global framework. financial inclusion brings to fore innovative models, new products and new players. while international standards are designed to be applied flexibly in all country contexts, the application has tended to be focused on traditional constructs and activities that cater to the “ already served ” market. there is therefore a need for a commensurate evolution in thinking on proportionality – the acceptable points of balance between the policy objectives of financial stability, inclusion and integrity. this concept of proportionality has been aptly identified as one of the g20 principles of financial inclusion. the bsp has been involved in the g20 global partnership for financial inclusion particularly in the sub - group on principles5 and standard setting bodies our involvement has allowed the sharing of experiences particularly on balancing the risks and benefits of financial inclusion through the application of internationally accepted prudential and supervisory standards. financial inclusion is a gargantuan task which can only be achieved through well - coordinated and meaningful partnerships. we are already seeing some evidence of success... in kenya, seventeen million6 are able to send and receive money through their safaricom mobile phones using m - pesa, a small - value electronic payment and store of value system. 7 in brazil, commercial banks have banked each of the 5, 564 municipalities through their banking agents. 8 a state - of - the - art biometric enabled smart card and battery operated principles – leadership, diversity, innovation, protection, empowerment, cooperation, knowledge, proportionality and framework. out of a population of 40. 5 million ( world bank findex, 2012 ). safaricom limited annual report, year ended 31 march 2013. branchless banking in brazil, cgap, 2010. bis central bankers ’ speeches authentication devise has allowed icici to provide micro - savings accounts to the unbanked in india. 9 in the philippines, banks are providing microfinance loans and deposit products to over a million clients, majority of whom claim to have never had the opportunity to save in a formal financial institution in their lives. at the end of the day, we are starting to see more people participate in the financial system. with this access to finance, households are better able to manage their finances, guard against shocks and take advantage of economic opportunities

sheets but bis central bankers ’ speeches can also favour the liquidation of impaired assets. suitable ways of reducing their weight on balance sheets must be devised. the increase in sovereign risk has hampered our banks ’ wholesale funding. total fund - raising, net of eurosystem refinancing, shrank by 4. 6 per cent in the twelve months through may, reflecting a contraction in funding on international markets. the eurosystem ’ s two longer - term refinancing operations compensated for this shortfall and averted liquidity strains. by contrast, retail funding provided by savers resident in italy has not been affected by the crisis. in may bank deposits were 1. 2 per cent greater than twelve months earlier. the current slow growth in lending depends in the first place on the slackening of demand due to the recession. a brusque tightening of credit supply owing to the wholesale funding strains and the deterioration in loan quality was observed at the end of last year. supply conditions improved in the early months of 2012 thanks to eurosystem refinancing. new strains have emerged in recent months in connection with the instability of the markets. the three - month rate of change in bank lending to firms was slightly negative in may, while credit to households remained stable. the more stable forms of fund - raising – deposits and bonds subscribed by households – are sufficient to finance over 80 per cent of italian banks ’ lending, more than at the end of 2011. banks need to continue their pursuit of a structural rebalancing of sources of funding. the technical forms of credit must be evaluated with care. the share of total lending consisting of current account overdrafts is 28 per cent in italy against an average of 12 per cent in the rest of the euro area. this method of supplying credit to customers exposes banks to liquidity risk, makes cash outflows less predictable, and hampers the formation of eligible collateral for eurosystem refinancing. more attentive management of liquidity by firms could foster a reduction in recourse to overdrafts. the strict liquidity requirements for banks introduced by basel iii represent a necessary prudential safeguard of stability. the rules need to be fine - tuned to avoid potential pro - cyclical effects. in particular, the liquidity buffers built up during periods of expansion must be effectively usable in times of difficulty. the disincentives to the circulation of funds through the interbank market must be