Building a higher-level inclusive financial model
2024-11-25
China has over 53 million small and medium-sized enterprises, making it one of the countries with the largest number of small and medium-sized enterprises in the world. However, according to statistics, the average lifecycle of small and micro enterprises in China is only 2.7 years, with less than 2% surviving for more than 10 years. Inclusive finance has a typical long tail effect, characterized by small amounts and dispersion. Most inclusive finance customers have small business scales, weak capabilities, and unstable repayment sources. Mortgage guarantees are still the main risk mitigation method at present, and there is also a natural contradiction between diversified financial needs and high service costs for long tail customers. In 2013, the development of inclusive finance officially became a national strategy in China, and efforts were made to explore the construction of a long-term incentive compatible mechanism for the development of inclusive finance. Policies and measures such as the "Plan for Promoting Inclusive Finance Development (2016-2020)", "Management Measures for Special Funds for Inclusive Finance Development", and "Implementation Plan for Establishing Inclusive Finance Business Units in Large and Medium sized Commercial Banks" were successively introduced to support the development of inclusive finance. The policy system supporting the development of inclusive finance has taken shape, driving a significant increase in the coverage, accessibility, and satisfaction of small and medium-sized financial services, and promoting China's inclusive finance to reach a global leading level. The 2023 Central Financial Work Conference has clarified the key work direction of inclusive finance to support the real economy, and various policies will be accelerated. According to data from the State Administration of Financial Supervision and Administration, loans to small and micro enterprises have continued to grow rapidly. As of the end of the third quarter of 2024, the balance of inclusive small and micro enterprise loans in China reached 32.58 trillion yuan, a year-on-year increase of 14.69%. The average interest rate of newly issued inclusive small and micro enterprise loans in the first three quarters was 4.42%, a decrease of 0.35 percentage points from 2023. Chinese financial institutions continue to build a sustainable business model for inclusive finance, breaking the "impossible triangle" of accessibility, risk, and interest rates in inclusive financial services. From the perspective of specific development models, large banks usually adopt a national scale promotion model, fully leveraging the advantages of branch and employee numbers. In recent years, they have gradually shown the characteristics of high efficiency, high quality, and low risk. Some banks have established inclusive finance development committees, formulated inclusive finance strategic development plans, and established inclusive finance management institutions at all levels. Some regional commercial banks adopt a regional market focus model, relying on services to specific regions and target groups to achieve profits. Some new commercial banks with digital advantages provide differentiated services based on massive mobile payment customer base and transaction record information, relying on technologies such as big data and artificial intelligence. More and more large and medium-sized banks are upgrading their inclusive finance secondary departments, which were originally under the retail business department or corporate finance department, to primary departments, establishing professional departments, teams, and management systems, formulating credit management policies that meet the needs of inclusive finance, and promoting the sustainable development of inclusive finance business. Chinese financial institutions are deeply exploring the potential of digital technology and creating a Chinese sample of digital inclusive finance. With the continuous maturity of inclusive financial products and service systems, especially the rapid development of digital technology, it is possible to collect information at a low cost and reach users. The technology operation and maintenance cost of a single individual customer has been reduced to one tenth of that of traditional banks, while also reducing the operating and credit risk management costs of financial institutions, thus achieving scale growth under the premise of controllable risks. At the same time, reducing costs and increasing profits will substantially change the scale, cost, and risk function relationship of small and micro enterprise loans, and also promote the gradual upgrading of inclusive finance from the initial policy driven and regulatory guidance to a sustainable business model. From the perspective of development trends, China still has the conditions to continuously improve the digital inclusive finance ecosystem through policy system improvement, technology platform construction, and other aspects, on the basis of outstanding progress in inclusive finance. Improve the policy system of digital inclusive finance, leverage incentives and constraints, and strengthen the construction of credit information sharing platforms. Explore the cross integration of inclusive finance with advanced technologies such as artificial intelligence, big data, cloud computing, and blockchain, fully tap into the potential of data, and improve the technological system of digital inclusive finance. Clarify the different positioning of large, medium, and small financial institutions, and guide various banking institutions to adhere to their positioning and engage in healthy competition. Author: Ba Shusong (Chief Economist of China Banking Association)
Edit：Luo yu Responsible editor：Wang er dong
Source：ECONOMIC DAILY
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