Financial Inclusion and Financial Stability: A Twin Engine for Sustainable Development in Africa

Introduction

Across Africa today, two big ideas are reshaping the financial landscape: financial inclusion and financial stability. They are not just buzzwords. These are two powerful forces that, when well-aligned, can help African countries unlock lasting development, reduce poverty, and build resilient economies that serve everyone not just the privileged few.

Financial inclusion is about giving more people access to financial tools like savings, loans, insurance, and digital payments. Financial stability is about making sure the entire financial system banks, microfinance institutions, and fintech platforms can keep working smoothly even when the economy faces pressure.

What many people don’t realise is that these two goals are deeply connected. One strengthens the other. In this article, I’ll walk you through how they work together and why African countries like Rwanda must continue to invest in both.

What Is Financial Inclusion, Really?

Financial inclusion means that every adult, regardless of income, gender, or location, can access affordable and appropriate financial services. These services could be a basic savings account, access to a small loan, the ability to send money by phone, or even buy insurance to protect against emergencies.

This is especially important in Africa, where many people have historically relied on informal ways to manage money like keeping cash under the mattress, borrowing from neighbours, or saving in rotating savings groups (Ibimina in Rwanda, for example).

But the trend is changing fast. Thanks to mobile money platforms like MTN Mobile Money, Airtel Money, and agency banking, more Africans are now part of the formal financial system than ever before.

In Rwanda, the progress is quite impressive. According to the 2023 FinScope survey, over 93% of adults are now financially included, with a significant portion using formal services. That includes access to SACCOs, commercial banks, and mobile money platforms.

And What About Financial Stability?

Now, financial stability is about the strength and safety of the financial system as a whole. It’s about making sure that banks don’t fail, that inflation doesn’t get out of control, that people don’t lose confidence in the currency, and that financial shocks don’t trigger a crisis.

For example, if too many people take loans they can’t repay, banks start to accumulate bad debts. If banks then collapse, people lose their savings, businesses suffer, and the entire economy slows down.

So financial stability is not only about protecting banks, it's also about protecting people, businesses, and national progress.

The role of central banks is critical here. In Rwanda, the National Bank of Rwanda (BNR) plays the guardian role by setting regulations, supervising institutions, managing inflation, and ensuring confidence in the Rwandan franc.

How Do These Two Connect?

It’s easy to think of inclusion and stability as separate issues. Some even think that giving more people access to credit, especially low-income earners, might increase financial risk. But if managed well, financial inclusion can actually str

engthen financial stability.

Here’s how:

1. Diversified Risk

When banks only serve large businesses or a narrow group of clients, their income depends on the success of just a few sectors. That’s risky. By offering loans and services to a wider range of people smallholder farmers, street vendors, youth groups banks diversify their risk. If one group is struggling, others may still be doing well, keeping the bank stable.

2. Stronger Deposit Base

Financial inclusion brings more people into the savings culture. When more people open accounts and make deposits, banks get access to more stable and local funding. They don’t have to rely too much on foreign investors or expensive borrowing. That creates a solid foundation for lending and economic growth.

3. Greater Transparency

When money moves through formal channels, it becomes easier for central banks and regulators to track financial flows. That helps in identifying risks early, enforcing compliance, and making better policy decisions.

4. Boosts Economic Growth

When people can access finance, they can invest in businesses, pay for school fees, buy farming tools, or respond to emergencies. That leads to increased productivity, improved livelihoods, and ultimately a more resilient economy.

And a strong economy supports a stable financial system.

But Are There Risks?

Yes, and it’s important not to ignore them. Expanding financial access without proper oversight can create serious challenges.

For instance:

Over-indebtedness: If people take loans without proper financial education or if multiple lenders target the same clients, individuals may fall into debt traps.

Fraud and scams: With mobile finance on the rise, so are digital fraud schemes, especially among users who are not tech-savvy.

Weak regulation: Some fintech lenders operate without clear oversight, creating loopholes in consumer protection and risk management.

The solution is not to slow down financial inclusion but to do it the right way. This means building strong consumer protection systems, improving financial literacy, and ensuring that regulations keep pace with innovation.

A Closer Look at Rwanda

Rwanda offers a great example of how inclusion and stability can go hand in hand. The country has made serious investments in both areas.

On one side, we have:

Widespread access to mobile money services

• Expansion of SACCOs in rural areas
• Government-led financial literacy campaigns
• Promotion of savings and investment clubs
• On the other side:

The National Bank of Rwanda maintains strict oversight of financial institutions

• Inflation has been kept under control
• The banking sector is well-capitalized
• Policy tools are in place to monitor and mitigate risk
• The government’s Financial Sector Development Strategy (2022–2026) clearly outlines how Rwanda plans to deepen financial inclusion while ensuring macro-financial stability. This includes promoting gender-sensitive finance, youth entrepreneurship, digital inclusion, and responsible lending.

Why This Matters for Africa

Most African countries face the same challenge: building inclusive economies while avoiding financial chaos. Inclusion without structure can be dangerous. But stability without access is equally unfair.

That’s why policymakers must view these two forces as complementary. Financial systems must be designed to empower not exclude. And banks must be encouraged to innovate but also held accountable.

How MDS Consultancy Fits In

At MDS Consultancy, we work closely with cooperatives, NGOs, students, and entrepreneurs to make financial inclusion real and responsible.

We help:

Design and assess inclusive financial products

• Train youth and community groups in financial literacy
• Support data-driven research on access to finance
• Conduct feasibility studies for microfinance institutions
• Evaluate the impact of financial services in communities
• We believe that sustainable development in Africa depends on solutions that combine access, education, and system-wide resilience.

Final Thoughts

Financial inclusion and financial stability are not in competition. They are partners. One gives people access to opportunities. The other ensures those opportunities don’t collapse in crisis.

For Africa to move forward, we need both. We need banks that serve the people. We need regulation that protects without choking innovation. And we need a culture of responsibility from borrowers, lenders, and policymakers alike.

It’s not about fast access. It’s about smart access. And that’s where the future lies.

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