Underdeveloped financial systems in poor countries provide inadequate shock absorption and can enhance macro-financial vulnerabilities stemming from external shocks, hindering efforts to achieve strong and sustainable growth and poverty reduction. Financial systems in low-income countries dominated usually by their banking sectors are traditionally relatively isolated from international financial developments, given the limited access to external financing. With a relatively stable domestic funding from resident deposits, the erosion of asset quality is the critical threat to financial stability in these countries.