The global financial crisis has highlighted the vulnerability of financial systems and stressed the need for improving the management of financial vulnerability. The financial stability issue in low-income countries (LICs henceforth) has received less attention in recent years, insofar as they have been less impacted by the global financial crisis than emerging economies. However, a better understanding of financial fragility mechanisms in LICs is crucial. The experience of LICs shows that they could suffer sharp increases in non-performing loans and banking crises, and that the cost of banking crises is high, even if the banking sector is small.
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Source: Africa Finance Forum Blog