a significant proportion of the population. it becomes even more complicated when we consider rural communities and communal forms of land ownership which is not conducive for providing surety for loans. as the sub - prime crisis in the us has illustrated : while lending to disadvantaged communities may be a noble cause, there are dangers to excessive lending, particularly when such lending is simply financing consumption. in south africa, we experienced extremely strong growth in unsecured lending between 2009 and 2013, some of which was to lower - income groups previously excluded from formal sector borrowing and some of which may yet come to manifest itself in higher levels of non - performing loans – although it is the view of the in this regard, i prefer the term “ financial deepening ’ over ‘ financial inclusion ’ for the reasons stated above ; the former is a much broader concept. bis central bankers ’ speeches south african reserve bank that our banks have sufficient capital buffers to absorb any such increases. access to unsecured loans has meant that lower - income groups could avoid having to borrow from ruthless informal money - lenders at exorbitant rates of interest. but it has not solved the problem of over - indebtedness of the poor and its social consequences. in numerous instances, large portions of earnings were paid over to lenders ( both formal and informal ), often in terms of court orders, leaving wage earners with very little to live on. there were also concerns that this form of lending and its rapid expansion posed a systemic risk to the financial sector and broader financial system. however, unsecured lending was a fairly small portion of total bank lending. nevertheless, at a micro - prudential level, the bank supervision department of the south african reserve bank kept a close eye on these forms of loans – and although one significant player in the field, african bank, did collapse, its failure cannot be solely attributed to its provision of unsecured lending. the role of the central bank in this instance was not to decide who the beneficiaries of bank loans should be or how much should be lent ; the role of the central bank was to ensure that commercial banks in general maintained adequate capital and made appropriate provisioning for risk. the african bank episode did illustrate the danger of talking about the need for financial inclusion in a glibly manner. banks have often been criticised for not extending lending to the poorer segments of society, but when they did, they were criticised in some quarters for “ reckless lending ”

should not be used under such circumstances. we know there is nothing we can do about the impact or first - round effects of these supply - side shocks. we try to look through these effects and focus on the second - round effects, where higher prices feed into higher generalised inflation and higher wage settlements. if we ignore these pressures, inflation expectations are likely to rise. and if wage negotiators and price setters believe that inflation will accelerate, they will adjust wages and prices accordingly, and in so doing bring about a self - fulfilling prophecy. this scenario of high inflation and low growth creates a dilemma for monetary policy. the tightening of monetary policy could have a negative impact on the already weak economy, but failure to act could cause inflation expectations to become unhinged and ultimately undermine inflation. it is a difficult balancing act. since january 2014, we have been in a gradual tightening cycle, with a cumulative increase of 200 basis points since then, the most recent a 25 basis point increase in march. the moderate nature of the tightening cycle is due to our concern over the growth outlook ; the tightening would have been more aggressive had the economy been more buoyant. furthermore, real interest rates remain relatively low, implying an accommodative monetary policy stance despite the tightening. but central banking is not only about monetary policy. since the global financial crisis, the mandates of central banks have expanded, particularly with respect to financial stability. prior to the crisis, many central banks had an implicit mandate, or no mandate at all, in this regard. in south africa, for example, although the south african reserve bank had explicit responsibility for regulating and supervising individual banks ( micro - prudential policy ), it did not have an explicit mandate to ensure the stability of the financial system as a whole. by way of an example, excessive price increases or bubbles in asset markets, including the housing market – particularly if financed by excessive leverage or borrowing against these assets – could pose a risk to the financial system at large should the prices of these assets collapse. prior to the global financial crisis, conventional wisdom dictated that there was not much that central banks could do to cool down overheating asset markets. indeed, many – including federal reserve bank chairman alan greenspan – argued that there was no reason why central banks were better placed to recognise asset price bubbles – and that the best they could do was to clean up after things had already fallen apart. the predominant view at the time was that things were