China makes gains, faces hurdles in extending financial services

Inclusive finance will play a key role in China's goal of building a "well-off society" by 2020. The nation's financial industry should make itself available to all people, said Wu Xiaoling, vice chairwoman of the Financial and Economic Committee of the National People's Congress and former vice governor of the central bank.

More than 50 countries have set formal targets and goals for inclusive finance in recent years, indicating growing global recognition that access to financial services plays a critical role in reducing extreme poverty, boosting shared prosperity, and supporting sustainable development.

Systematic reforms

To clear hurdles, the State Council in January released the 2016-2020 Plan on the Development of Inclusive Finance, China's first national strategic plan on financial inclusion. It targeted building inclusive financial service and security systems that provide reasonably-priced, convenient and secure services to small companies, farmers, low-income urban households, the poor, the disabled and the elderly. It vowed to boost inclusive finance's development to a level comparable to the global average by 2020.

The government also reiterated in a report in March the development of inclusive finance to increase services for micro, small, and medium-sized businesses as well as for rural areas.

"To tackle the issue, systematic reforms are required," said Dong, suggesting that farmers should be endowed with land rights that can be viewed as assets when obtaining loans.

Ellen Richey, vice chairwoman of Risk and Public Policy at Visa Inc., said that China already has an advantage in fostering inclusive finance, as 79 percent of its residents have financial accounts, much higher than most countries. But account holders generally only use them for basic banking services or use them infrequently.

"The challenge to inclusive finance in China is not necessarily to get someone an account, but to give them an efficient way to use it," she said, adding that electronic payment and mobile phones will enable China to bypass expensive investment in infrastructure, such as terminals and telecommunications.

Former New Zealand Prime Minister Jenny Shipley called on lenders to form trust relationships based on human potential, rather than just looking at assets. Shipley said that micro-finance requires collaboration between multiple players, including governments, financial institutions and NGOs.