BANKS in China expect to see their revenue from inclusive finance grow by US$63.4 billion in 2020 and this increase is set to be the highest globally, according to an EY report yesterday.
Inclusive finance is the provision of affordable, accessible and relevant financial products to individuals and businesses which had previously not been able to access them.
The report states that banks could focus on three measures to boost their financial inclusiveness: to customize offerings and simplify financial solutions to meet the specific needs of customers at affordable cost, to innovate channels to reach more customers at lower cost and to creatively mitigate risk to address absence of credit histories.
To boost commercial banks’ lending to small and micro-sized enterprises, startups and agricultural enterprises, the People’s Bank of China announced last September a targeted reserve requirement ratio cut, which went into effect yesterday.
EY identifies start-up community with access to diverse sources of capital as “an important enabler” to China’s inclusive finance sector.
The digital finance provided by China's leading Internet and mobile payment platforms have tremendously enhanced financial inclusion in emerging markets such as China, said Jack Chan, EY’s China financial services managing partner.
EY sees “massive potential” for banks to provide more credit to the agriculture industry as loans to the sector account for just 1 percent of the commercial banking credit portfolio.
Farmers’ access to conventional bank loans has been limited by a lack of credit data and many are then forced to secure credit from “shadow banking” firms, the report noted.
Chinese banks could close a financing gap of 3 trillion yuan (US$441 billion) to the agricultural sector by developing creative credit profiling techniques, said a report by Chinese Academy of Social Sciences in 2016.