it was agreed to increase the size of guarantees for efsf bonds, thereby raising the ceiling of the facility ’ s lending capacity. the efsf is now able to purchase government bonds from the market and to inject more funds into the banking system by, for example, recapitalizing financial institutions. the agreement was ratified in october 2011. bis central bankers ’ speeches in financial markets, however, concerns emerged about possible contagion of the crisis to other euro area member states such as spain and italy. these countries have much larger economies, and therefore the lending capacity of the facility already agreed at the meeting of heads of state or government of the euro area was perceived to be insufficient to fend off a further spread of the crisis. however, an additional increase in the lending capacity was difficult due to strong opposition led by germany. at the euro summit, a meeting of eu and euro area leaders held at the end of october, it was therefore agreed to leverage the resources of the efsf to enhance its ability to deal with critical situations. 2 it will probably take a while for the leverage plan to actually take effect, as details have to be worked out in november and then need to be approved by each member state. needless to say, building mechanisms to prevent the fiscal crisis from spreading to the euro area as a whole is extremely important for the stability of international financial markets. what matters is whether the mechanism succeeds in gaining the confidence of the market. 3 3. fiscal problems leading to problems in the financial system the third problem is that the fiscal problems in europe are threatening the stability of the financial system. what started out as a fiscal problem in greece, coupled with concerns over its ability to consolidate its finances and carry out economic reforms, has spread to other european countries, with doubts arising regarding their creditworthiness. this, in turn, raised concerns about the balance sheets of european financial institutions holding large volumes of government bonds of peripheral countries. consequently, european financial institutions, including financial institutions from france and belgium – core countries – began to find it difficult to raise funds from markets. the fiscal problems in europe have thus begun to seriously undermine the stability of the financial system in the region. in july 2011, the results of a stress test for financial institutions performed by the eu confirmed that progress was being made in strengthening their capital bases. however, the results did not mitigate investors ’ concerns over the soundness of the financial system. in fact, the imf has stressed the

opaque with regard to their business and financial conditions. also, they are often short of collateral. therefore, they are at a disadvantage when it comes to borrowing money. however, it is mainly small companies that create jobs for the poor. their investments and innovations can support macroeconomic growth. also in the context of small businesses, progress in financial inclusion has been slow in developing asia. the recent percentage share of small companies that borrow from banks was 15 percent in developing asia, while it was 32 percent in non - asian developing regions. 13 one statistical finding clearly shows the benefits of reducing this gap. that is, the level of bank credit relative to gdp can positively explain an income increase for the bottom see allen, f., demirguc - kunt, a., klapper, l., and martinez peria, m. s. ( 2016 ). " the foundations of financial inclusion : understanding ownership and use of formal accounts, " journal of financial intermediation, vol. 27 ( 1 ), pp. 1 - 30. see dupas, p., and robinson, j. ( 2013 ). " why don't the poor save more? evidence from health savings experiments, " american economic review, vol. 103 ( 4 ), pp. 1138 - 1171. see the first chapter of adb ( 2013 ). adb - oecd study on enhancing financial accessibility for smes : lessons from recent crises. mandaluyong city, philippines : adb. income group. 14 efforts are on - going in developing asia to enhance the accessibility of credit to small firms beyond their informational opaqueness. one approach is a centralized approach. an example is to establish a credit bureau for small companies. such a bureau is an important financial infrastructure and is managed by a public agency in eight of the 20 developing asian countries surveyed by the adb. 15 an additional example is to use a public credit guarantee scheme, which has been established in 16 of the 20 countries. these institutional supports have the potential to encourage banks to provide loans for small businesses, thereby promoting financial inclusion. another approach to deal with the informational opaqueness of small businesses is a more individual approach. a prominent example is microfinance. the adb and other multilateral development banks have supported the rapid growth of microfinance institutions by providing them with loans, grants, and technical assistance. in terms of the number of borrowers, microfinance is more active in developing