Exploring the road to the development of inclusive finance with Chinese characteristics

Exploring the road to the development of inclusive finance with Chinese characteristics

Liu Guoqiang

Since the 18th National Congress of the Communist Party of China, the Party Central Committee with Comrade Xi Jinping has attached great importance to the development of inclusive finance, formulated a series of strategic plans and policy measures to promote the development of inclusive finance, and promoted the development of inclusive finance into a new stage. The service subject is diversified and the service coverage is wide. The financial infrastructure such as payment and credit information is increasingly perfected. The education and protection of financial consumers are continuously strengthened. The basic financial services such as the number of bank accounts per capita and the density of bank outlets have reached the international level. Upstream level. Like the overall development of China's financial sector, China is promoting the development of inclusive finance, focusing on the combination of international experience and specific national conditions. Through continuous exploration and unremitting efforts, China has developed a development of inclusive finance with Chinese characteristics. Road provides a useful reference for the international community to promote the development of inclusive finance.

The Reference and Application of International Experience in China's Inclusive Financial Practice

In order to develop inclusive finance, various countries have innovated many effective models to solve the problems in the promotion of inclusive finance, such as the proxy banking model in Brazil and other countries, the mobile payment model in Kenya, and the microfinance model in Indonesia and Bangladesh. , the simple account model of Mexico, the Philippines and other countries, the biometric identity system in India, and the government-driven model represented by Mexico, and so on. While fully drawing on the international experience of inclusive finance, China pays attention to combining its own characteristics of national conditions, further innovating and developing, and explores a service mode, an account model, a digital payment model and a microfinance model with its own distinct characteristics.

Agricultural support service point mode

Similar to the agency banking model in Brazil and other countries, in order to improve the payment service environment in rural areas and improve the level of rural financial services, China has explored the establishment of a model for helping farmers to withdraw money. The farmer's withdrawal service means that the bank card acceptance institution arranges the bank card acceptance terminal at the designated cooperative merchant service point of the rural township (town) and the village, and provides the debit card cardholder with small withdrawals and balance inquiry. China's agricultural aid withdrawal service started in 2010 and gradually enriched and deepened in the following years. In 2014, the People's Bank of China issued the “Guiding Opinions on Comprehensively Promoting the Construction of Rural Payment Service Environment”, which further enriched the function of helping farmers to withdraw money from service points. In addition to small withdrawals and inquiries, service points can be added for cash remittance and transfer. Remittance, agency payment and other services, while moderately adjusting the limit management requirements, requiring the service point to handle agricultural withdrawal or cash remittance business, in principle, the single card, the cumulative amount of a single day shall not exceed 2,000 yuan. In the past one or two years, some of the agricultural support points have also explored the functions of e-commerce, financial consumer education and protection, and become a more diversified agricultural financial service point.

By the end of 2016, there were 983,400 agricultural assistance and withdrawal services in rural areas, and the coverage rate of village-level administrative districts exceeded 90%, which promoted the “last mile” of financial services. This model enables consumers to enjoy basic financial services without leaving the village, and can more easily query and withdraw various types of agricultural subsidies and government-issued pensions, medical subsidies or subsidies, reducing consumer transactions and transportation costs. .

Account mode

As a basis for obtaining a series of financial services such as payment and credit, opening an account has always been a concern of all countries. Most countries have high requirements for opening accounts, require a lot of supporting documents, or require cumbersome procedures, which hinders the increase in account ownership and access to financial services. Countries such as Mexico, the Philippines, and India have opened basic or simplified accounts for residents by simplifying the requirements and procedures for opening bank accounts.

China's account penetration rate is relatively high, and it is at the upstream level in the world. This is mainly due to the following factors: First, compared with the general practice abroad, China's account is easy to set up under the premise of meeting anti-money laundering requirements. Most banks can open accounts for free, and generally do not charge customers for account management fees. Second, China has a relatively developed banking system, especially in commercial towns and cities. Third, it also benefits from the digitalization (G2P) of Chinese government transfer payments. In recent years, the Chinese government has successively introduced various types of agricultural subsidies, such as subsidies for supporting agriculture, new rural social endowment insurance, and new rural cooperative medical insurance. In order to improve the efficiency and safety of subsidy distribution, the Chinese government has actively promoted the distribution of various subsidy funds to households through bank cards, and realized the digitization of government transfer payments, which has also objectively promoted the increase in the penetration rate of Chinese accounts. "There is a situation where every family has an account and an adult has an account."

Digital payment mode

Unlike the digital payment model in Kenya, the early development of non-bank payments in China was mainly for online shopping payment and transaction services. With the rapid development of e-commerce and social networks, this business has developed rapidly. In 2010, the People's Bank of China issued the “Measures for the Administration of Payment Services for Non-Financial Institutions” and issued the payment service license for the first time in May 2011. The scope of the license business includes online payment such as Internet payment and mobile phone payment. At present, the People's Bank of China has approved a total of 271 non-bank payment institutions to engage in payment services, of which 116 provide online payment services. The payment services provided by non-bank payment institutions cover SMEs and individuals, especially online payment. As an essential part of Internet economic transactions, they mainly serve e-commerce, network payment, daily consumption and many other fields, facilitating various small and medium-sized networks. Sellers and individual buyers play an important role in inclusive finance. From 2013 to 2016, the amount of business handled by payment institutions increased from 37.1 billion to 185.5 billion, and the amount increased from 18 trillion yuan to 120 trillion yuan, with a compound annual growth rate of 71% and 90% respectively.

Compared with the digital payment model in countries such as Kenya, China's digital payment has its own unique characteristics: First, the high penetration rate of Chinese accounts, the development of non-bank online payment mainly depends on existing bank accounts, and the payment account plays a supporting role. Second, China's digital payment is mainly based on the Internet/mobile network, and the SMS/telephone-based method is relatively small. Third, China's non-bank network payment providers are mainly non-bank payment institutions, and mobile communication providers mainly undertake infrastructure functions. The share of mobile payments is relatively small.

The rapid development of digital payment has also driven commercial banks to innovate and develop payment services. In recent years, China UnionPay has cooperated with commercial banks and mobile phone manufacturers to establish a mobile payment service, and has created “Cloud Flash Pay”. Since February 2016, it has launched a series of innovative mobile payment products to improve payment efficiency and improve the payment experience. It effectively satisfies the safe and convenient payment needs of the broad masses of the people. As of the end of 2016, the “Cloud Flash Payment” series of mobile payment products has accumulated more than 20 million cards, with nearly 200 million transactions and a transaction value of over 20 billion yuan.

Microfinance model

The role of micro-institutions is to solve the problem of information asymmetry by taking advantage of the small size, low level, and familiarity with local conditions. Therefore, the development of micro-institutions was once an international trend. Microfinance in developed countries such as the United States and Japan started early and has always played an important role in the economy. In recent years, developing countries have made remarkable progress in exploring microfinance institutions for rural and disadvantaged groups.

China's micro-institutions include urban credit cooperatives and rural credit cooperatives (and urban commercial banks, rural commercial banks and rural cooperative banks that have been transformed from them), as well as rural banks and mutual funds that have been actively promoted by the Chinese government in recent years. New financial institutions such as the society, as well as non-deposit organizations such as microfinance companies. These microfinance institutions and organizations have effectively compensated for the shortcomings of traditional financial institutions and played an active role in serving the inclusive financial target groups.

Rural credit cooperatives are the oldest and most widely distributed financial institutions in rural areas. However, due to various reasons, the rural credit cooperatives themselves were once in trouble in financial and management, and could not effectively serve the three rural areas. After the successful reforms in 2003, China's rural credit cooperatives began to develop steadily, and their ability to serve the three rural areas continued to increase. In recent years, emerging financial institutions such as village banks and mutual funds societies, as well as microfinance companies, have also been developing rapidly in China. Such institutions reflect their own advantages to a certain extent. First, compared with traditional financial institutions, such new institutions and organizations often have clear market positioning and target customer groups. Rural banks are established in counties or townships, rural mutual aid cooperatives are located in rural areas, and most small loan companies are located in areas or communities where small and micro enterprises gather. These institutions are very close to the service targets, and village banks and small loan companies mainly serve Small and micro enterprises and farmers, and mutual funds help the members. Second, compared with the traditional types of commercial banks, microfinance institutions have fewer management levels, and loan approvals are more convenient and faster, which can better meet the characteristics of “short, small, frequent and urgent” financing for farmers and small and micro enterprises. . Third, microfinance is mainly based on local service and can take advantage of the “acquaintance society” and comprehensively use various measures such as new agricultural business entity guarantee, guarantee company guarantee, farmer joint insurance, and industrial chain guarantee to reduce information asymmetry.

China has initially formed its own characteristics in the practice of inclusive finance

In the process of developing inclusive finance, China has also explored many unique practices, such as conducting inclusive financial pilots, exploiting the role of developmental and policy finance, emphasizing the role of large commercial banks, and strengthening financial infrastructure. etc. These models and practices have been tested by Chinese practice and can provide useful lessons for the international community to promote the development of inclusive finance.

Exploring the path of inclusive financial innovation through pilot methods

China is the largest developing country in the world, with the characteristics of emerging and transitional. The development process of China's financial industry can also be said to be the process of reform and opening up. In this process, the pilot approach was widely used to gain experience in innovation and reform.

The Chinese government also attaches importance to the use of pilot methods in promoting the development of inclusive finance. Many of the practices in the inclusive finance sector have been developed on the basis of pilots. Taking the agricultural withdrawal point as an example, the agricultural aid withdrawal business was first piloted in four provinces and cities such as Chongqing and Shandong in 2010. After the experience was gained, it was promoted nationwide in 2011, and in 2014, it was issued The Guiding Opinions on Deepening the Construction of Rural Payment Service Environment will further expand the application and generalization of the results of the modern payment system construction in rural areas.

In order to explore sustainable and reproducible development experience of inclusive finance, from October 2015 to now, the People's Bank of China has approved the pilot projects of inclusive finance in Ningbo City, Zhejiang Province, Yijun County of Shaanxi Province and Qinghai Province. At the end of 2016, with the approval of the State Council, the People's Bank and other 10 ministries and commissions formally approved the “Overall Plan for the Pratt & Whitney Financial Reform Pilot Zone in Lankao County, Henan Province” and established the first national-level inclusive financial reform pilot zone. These pilots are not only different in size and location, but also in different administrative levels. More importantly, the positioning is different. The focus of the pilot project in Ningbo is to actively explore the effective path of digital technology to promote the development of inclusive finance based on mobile finance. The focus of the pilot project in Yijun County focuses on the development of rural inclusive finance for the vast and underdeveloped regions of the central and western regions. The path that can be promoted; the focus of the pilot project in Qinghai Province is to actively explore the path of integrating inclusive finance with green finance and precision poverty alleviation on the basis of agriculture and animal husbandry; Lankao County is the first national-level inclusive financial reform pilot zone, with emphasis. In the county's inclusive financial development path, especially in the area of ​​Pratt & Whitney Finance to promote economic transformation and development, optimization of new urbanization financial services and other aspects. Since the pilot was approved, the pilot areas have carried out the pilot work in a safe and orderly manner around their own central tasks and achieved positive results.

Focus on the unique role of development finance and policy finance

In the process of promoting the development of inclusive finance, the Chinese government actively encourages development and policy finance to play a role. Governor Zhou Xiaochuan pointed out that the development finance that China first explored is a financial model that serves the national strategy, market operation, self-management, long-term investment, credit support, government subsidies, low cost, and financial sustainability. This model will not create a squeeze on financial resources, avoiding problems such as moral hazard and market distortions. As a national strategy, Inclusive Finance has received strong support from the National Development Bank. The other two policy banks also play an important role in inclusive finance. In the field of inclusive finance, focusing on the positive role of development institutions and policy banks, making them an important supplement to commercial financial institutions, is a practice with unique Chinese characteristics.

On the one hand, through reform, the strength of development financial institutions and policy banks will be enhanced, and their market positioning will be clarified. At the end of 2014 and early 2015, the Chinese government promoted the reform of these institutions. In November 2016, the State Council approved the regulations of the National Development Bank, the Agricultural Development Bank and the Export-Import Bank, which were drafted and reported by the People's Bank of China in conjunction with relevant departments. The approval of the charter will help the three banks to further strengthen their functional orientation, adhere to the improvement of the modern financial enterprise system, enhance their sustainable development capabilities, and give full play to their important role in the inclusive finance sector, in order to promote sustained and healthy economic and social development. Greater contribution. On the other hand, the Chinese government encourages developmental and policy banks to cooperate with banking financial institutions in the form of wholesale funds transfer to reduce the cost of funds for banking financial institutions to carry out student loans and small and micro enterprise loans; to guide the National Development Bank, The Agricultural Development Bank issued special financial bonds for the promotion of poverty alleviation through the inter-bank market to expand the source of funds.

Through these efforts, the National Development Bank, the Export-Import Bank and the Agricultural Development Bank are implementing the national small and micro enterprise loan policy, increasing financing support for key areas and weak links in modern agriculture and water conservancy construction, and supporting the three rural and poverty alleviation projects. And the distribution of student loans has played an active role.

Pay attention to the role of large financial institutions in inclusive finance

Experience in other countries has shown that microfinance institutions naturally have the advantage of better serving the inclusive financial target group. Based on its own reality and the exploration of inclusive finance, China realizes that inclusive finance is not only the responsibility of microfinance institutions, but also that large financial institutions have the obligation and can do well inclusive financial work.

In the process of the commercialization of the Agricultural Bank of China in the mid-to-late 1990s, its county-level outlets contracted sharply, but this situation has been reversed since 2008. Since 2008, the Agricultural Bank has continued to promote the reform of the Ministry of Agriculture, Rural Finance, and the Ministry of Agriculture, and has achieved remarkable results in upgrading county and agricultural inclusive financial services. Since its establishment in 2007, China Postal Savings Bank has become one of the most important financial institutions in rural China, playing an important role in serving agriculture, rural areas and minorities. In May 2017, with the approval of the State Council, the China Banking Regulatory Commission and other departments jointly issued the “Implementation Plan for the Establishment of the Inclusive Financial Business Unit of Large and Medium-sized Commercial Banks”. As of the end of June 2017, the five major state-owned commercial banks have established the Inclusive Finance Division at the head office level.

Promote the continuous improvement of financial infrastructure construction

The People's Bank of China has always focused on strengthening the construction of financial infrastructure such as credit reporting and payment, creating a good environment for inclusive financial development, and laying a solid foundation for the sustainable development of inclusive finance for commercial institutions. The completeness of China's financial infrastructure is not only in developing countries, but also in the world.

In strengthening the construction of the payment system: First, continuously strengthen the system construction. The Bank continued to strengthen the construction of the People's Bank of China and various professional payment and settlement systems, and organized the construction of a network payment and clearing platform for non-bank payment institutions, laying a solid foundation for efficient and accurate handling of massive payment and settlement services. The second is to strengthen the construction of payment clearing networks in rural areas, support relevant banking institutions to further extend the bank card acceptance network to rural areas, and support rural financial service institutions and outlets to adopt a flexible and convenient way to access the People's Bank payment system or other specialized payment clearing systems. As of the end of 2016, the People's Bank of China's payment and settlement system covered 117,900 rural financial institution outlets with a coverage rate of 95.96%.

In establishing and improving the inclusive financial credit information system: First, establish a credit information database and service network for small, medium and micro enterprises and farmers in cities and counties, and establish multi-level small and micro enterprises and farmers' credit file platforms. As of the end of 2016, a total of 2,611,400 small and medium-sized enterprises and 172 million rural households have established credit files. Second, the institutions engaged in credit business will access the basic database of financial credit information and expand the coverage of the database to the financial market. By the end of 2016, the database had collected information on 22.1 million enterprises and 912 million natural persons, providing corporate and personal credit report inquiry services to nearly 3,000 access institutions, and basically achieved full coverage of licensed financial institutions. In addition, the People's Bank of China has also established a centralized and unified self-service movable property and rights pledge registration platform based on the Internet to provide services for small and micro enterprise financing.

Of course, China's inclusive finance still faces some challenges and problems, mainly as follows: First, the imbalance problem includes not only the financial institutions' inclusive financial services capacity, but also the inter-regional and urban-rural imbalances. The imbalance between urban and rural areas; the second is the issue of commercial sustainability. In this regard, we have taken many measures and accumulated a lot of useful experience, but we still need to explore effective ways to achieve sustainable financial business. Third, how to guide Internet finance. Effectively exerting its positive role, the Chinese government has issued the "Guiding Opinions on Promoting the Healthy Development of Internet Finance", guided the establishment of the self-regulatory organization of the Internet finance industry, and launched a special rectification of Internet financial risks, but still need to further guide Internet financial regulation. development of.

In the next step, we will thoroughly implement the spirit of the National Financial Work Conference and deeply understand the important expositions of General Secretary Xi Jinping on inclusive financial work. Guided by the five development concepts of “innovation, coordination, green, openness, and sharing”, we will learn from international experience. Further promote the development of inclusive finance, and further explore the path of inclusive finance with Chinese characteristics, so that the results of financial development can benefit the wider masses of the people. ■

Author is assistant to the president of the People's Bank of China

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