Inclusive finance has become a central issue in China’s financial development in recent years. Inclusive finance plays and important in development and future strategic choices. To better understand inclusive finance Runbo Research Center for Digital Finance, THUIFR, conducted research on the meaning, development, and challenges of inclusive finance in China.
The definition of inclusive finance
Inclusive finance is not only a matter of business strategy and vision, but also a political issue and moral option to achieve balanced development and narrow the gap between the rich and the poor.
Inclusive finance is a systematic concept and policy goal that includes the following :
Inclusive finance is an inclusive and fair financial services system that can be not only enjoyed by the rich, but also by the poor and vulnerable groups, by weak industries and by underdeveloped areas.
Financial inclusion is carried with the continuous improvement of the legal environment. The provision of inclusive financial services is carried out on the basis of affordable costs, which must reflect the requirements of cost and risk constraints to achieve sustainable development.
The supply of inclusive finance is primarily achieved by the provision of credit to disadvantaged groups. It also includes the broad provision of public financial services and capacity building.
The market system of inclusive finance is multi-level. It should be reflected and improved in commodity market, money market, capital market and insurance market.
Inclusive finance should be based on the use of modern scientific and technological methods, via the Internet, mobile Internet, big data and other platforms to improve efficiency, risk control ability and benefit level.
Inclusive finance must receive guidance and support by the government and regulatory authorities. The core of inclusive finance is the construction of the credit environment and market infrastructure, interest rate subsidies, differentiated regulation, assessment and evaluation.
Target objectives in the development of inclusive finance in China
Increase the coverage of financial services. It is necessary to achieve full coverage of physical banking outlets and insurance services, consolidate the village-level network of rural withdrawal services, improve utilization efficiency, and promote more complete coverage of basic financial services at the administrative village level.
Improve the availability of financial services. It is necessary to greatly improve financial support for urban low-income people, people in difficulty, rural poor people, self-employed farmers, self-employed college and secondary school students, disabled workers and other initial entrepreneurs, improve barrier-free financial services for special groups, and strive to increase the coverage of agricultural insurance to more than 95% of rural households.
Improve financial service satisfaction to effectively improve the use efficiency of the range of financial instruments. In order to further improve the loan application rate and loan satisfaction of small and micro enterprises and farmers, it is necessary to improve the filing rate of credit files for small and micro businesses and rural households as well as reduce the rate of financial services complaints.
Improve service efficiency. The application of new technology and new mode effectively reduces the time for small and micro enterprises to obtain financing. Many banks' "credit factory" models incorporate streamlined credit procedures, cutting approval times from two to three months to five to seven working days. The loan "annual examination system", circular credit and other models have significantly improved the efficiency of enterprises.
New financial inclusion development challenges in China
From the perspective of the supply of services provided by financial institutions, the transmission mechanism is still facing challenges. Financial institutions need to improve their sense of being forward-looking in business and solve the problem of not wanting to lend. The government should pay special attention to the improvement of information technology (IT) systems, so that IT can enable digital transformation, and provide the right products, risk controls and sustainable profit models. Further, improving the quality of personnel, so that the practitioners really understand the market and serve the market well.
There are also challenges on the demand side of inclusive finance. Inclusive finance is a development challenge and a long-term issue. For instance, people do not want to borrow, or find it difficult to borrow because they lack the skills or knowledge to get the financing they need. The government can play a role encouraging financial institutions and borrowers to cultivate financial awareness and create an environment where financial needs and solutions can be sorted out. Some financial institutions are far away from the market, and their response to demand is sluggish. In this situation, it is urgent and necessary to work to encourage demand and supply elements together. For instance, some public data platforms and fintech companies have a lot of demand information and tools to prevent risks, but they lack the ability to supply adequate levels of finance. This suggests a role for other financial intermediaries to build bridges and help meet demand.
For the government and market regulatory authorities, the current policies, especially the fiscal, taxation and differential regulation, are working and need to be adhered to and improved. Current attention should be paid to:
Enhance the stability and predictability of policy, to avoid too large swings or policies which are difficult to comply with.
Respect the choice and innovation ability of practitioners and continue to explore the depth and breadth of the market.
Provide clear classification guidance. For example, at present, tax incentives and special assessment systems are implemented for small and micro-enterprise loans with a credit of less than 10 million yuan, but it is not easy to distinguish between the credit limit of a single bank for a single-family enterprise and the combined credit of multiple banks.
Solve the problem of data fragmentation, which is beyond the reach of a single Internet finance company.
