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International Monetary Fund. African Dept.
This Selected Issues paper analyzes Kenya’s success in boosting financial inclusion. Kenya has become a regional and global leader in mobilizing new technologies to advance financial inclusion, poverty reduction, and growth. The rapid progress of financial inclusion in Kenya has been a result of a friendly environment for the absorption of information technology, dynamic local banks, and open and stable regulations. Advances in financial inclusion over the past 10 years have allowed Kenyans to reap many of the benefits of financial access at a much faster pace than the typical cycle of financial deepening in low- and middle-income countries. Mobile financial services have lowered the transaction cost of remittances, allowing Kenyan households to smooth consumption in the face of shocks and significantly reducing poverty.
International Monetary Fund. Monetary and Capital Markets Department

Risk in the Non-financial Corporate Sector Under a pre-COVID Baseline and the “Market Shocks” Scenario 26. Effects of PD and Default Correlation Shocks in NFC Credit Portfolios TABLES 1. Recommendations to Enhance Stability Analysis and Stress Testing 2. Macroeconomic Scenarios for Stress Tests 3. Cost of Funding Shocks by Type of Liability 4. Specification of Market and Credit Risk Shocks for the Insurance Stress Test 5. Coverage of NFCs in the Micro-level Dataset 6. ROE, Leverage, and Liquidity of NFCs (2007–17) APPENDICES I. Banking

Mr. Shekhar Aiyar, Mai Chi Dao, Mr. Andreas A. Jobst, Ms. Aiko Mineshima, Ms. Srobona Mitra, and Mahmood Pradhan

. Specifications of Macro Scenario: Real GDP Growth Figure 18. Euro Area Banks: Solvency Stress Test—Baseline Scenario (EBA Coverage) Figure 19. Euro Area Banks: Change of CET1 Capital Ratio under Different Assumptions Figure 20. European Banks (EBA Sample): Capital Impact and Pre-Stress Bank Asset Quality Figure 21. Euro Area Banks: Changes in Capital and Growth Figure 22. Euro Area Banks: Dispersion of Change in Risk Weights Figure 23. Selected Euro Area Countries: Change in NFC Credit Standards Figure 24. Euro Area Banks: Solvency Stress Test—Adverse Scenario

International Monetary Fund. African Dept.

towards the NFCS, accounting for about 50 percent of total domestic credit extended in 2016. The domestic credit to the NFCS, as a percent of GDP, increased from 20.5 percent in 2010 to over 34 percent by 2016. Meanwhile, NFCS credit has grown at an average of about 20 percent since 2010. This has, in turn, increased the exposure of commercial banks to the sector, with inherent risks to the financial sector and the economy. Commercial, telecommunication, and investment sectors continue to receive the largest share of credit, followed by the construction sector ( Figure

International Monetary Fund. European Dept.

-to-internal funds ratio. Goretti and Souto (2013) , using firm-level data for eight euro area countries (including Portugal), find that higher debt overhang, proxied by debt-to-equity leverage or interest coverage ratio, is found to significantly reduce the firms’ investment to capital ratio. In a broader context, Cecchetti et Al. (2010) show that corporate debt becomes a drag on growth for levels beyond 90 percent of GDP. More recently, the European Investment Bank documents a negative relationship between NFC credit growth and the share of NPLs (EIB (2015)). Bergthaler, et

Mr. Dmitry Gershenson, Mr. Albert Jaeger, and Mr. Subir Lall

overhang, proxied by debt-to-equity or interest coverage ratio, is found to significantly reduce the firms’ investment to capital ratio. In a broader context, Cecchetti, Mohanty, and Zampolli (2010) show that corporate debt becomes a drag on growth for levels beyond 90 percent of GDP. More recently, the European Investment Bank documents a negative relationship between NFC credit growth and the share of NPLs ( EIB 2015 ). Bergthaler and others (2015) find that high corporate debt and NPLs represent a significant drag on investment, as credit-constrained firms cut back

Ms. Piyabha Kongsamut, Mr. Christian Mumssen, Anne-Charlotte Paret, and Mr. Thierry Tressel
How can information on financial conditions be used to better understand macroeconomic developments and improve macroeconomic projections? We investigate this question for France by constructing country-specific financial conditions indices (FCIs) that are tailored to movements in GDP, investment, private consumption and exports respectively. We rely on a VAR approach to estimate the weights of the financial components of each FCI, including equity market returns (which turn out having a relatively strong weight across all FCIs), private sector risk premiums, long-term interest rates, and banks’ credit standards. We find that the tailored FCIs are useful as leading indicators of GDP, investment, and exports, and as a contemporaneous indicator of private consumption. Credit volumes turn out to be lagging indicators of growth. The indices inform us on macro-financial linkages in France and are used to improve the accuracy of quarterly forecasting models and high-frequency “nowcast” models. We show that FCI-augmented models could have significantly improved forecasts during and after the global financial crisis.