Promoting Fair and Effective Allocation of Financial Resources Through Inclusive Finance
——Closing Remarks at the Roundtable on Ecosystem Building and Digital Development of
Inclusive Finance in Asia
Tian Guoli, Chairman of AFCA and Chairman of China Construction Bank
July 2, 2020
Distinguished Guests, Ladies and Gentlemen,
Good afternoon! Today we had a good discussion on promoting the ecosystem building and the digitization of inclusive finance. These are two distinctive topics of common concern. In our discussion, we have reached a consensus about many issues, which has provided insights and roadened our minds about the future of inclusive finance. I would like to take this opportunity to share the understanding, practices and future trend of inclusive finance from my perspective.
Firstly, the importance of inclusive finance is being more widely acknowledged. Small and micro businesses are the lifeblood of economic and social development and provide critical support to creating jobs and improving livelihoods, therefore they, as a whole, play a fundamentally supportive role in the society. However, individually speaking, they are obviously fragile, lacking in information, credit, fund and resilience in face of risks. They are easily disadvantaged and excluded when dealing with financial institutions and therefore tend to face financing difficulties, which makes a lasting global issue. The importance of small and micro businesses and the difficulties facing them have become the focus of policymakers, financial institutions and many stakeholders in Asian countries and the world at large. Promoting inclusive finance to achieve fair and effective allocation of financial resources has been a consensus of all parties to help the small and micro businesses. In Asia and around the world, getting this issue resolved is no doubt the basis for the long-term stability of any country.
Secondly, the Chinese banks, particularly large-scale banks, have made positive advances in inclusive finance. Big banks used to focus on big enterprises, because lending to them can generate a scale effect with low marginal costs and high returns. Those loans get approved mainly based on a positive list after banks review the materials submitted by enterprises. By contrast, financing for small and micro businesses features short term, small amount, high frequency, urgent need, and scattered application. A positive list dependent on one-by-one approval can hardly be efficient and professional. Further, small and micro businesses have relatively higher risks. Therefore, big banks, in fact, were not willing to, dared not and did not lend to them. However, the rapid development of FinTech makes transformation possible and serves as an endogenous driving force. FinTech empowers inclusive finance and causes a fission effect on business models and processes via big data mining, AI and cloud computing. For example, CCB made inclusive finance a bank-wide strategy in 2018 and has developed unique approaches. First, with the help of the Internet and big data technology, CCB draws an all-dimensional portrait of each enterprise through a combination of verified information, including business registration and operation, taxation, and power consumption, etc. Then, together with other information, the Bank is able to put in place a negative list. As long as a business is not on the list, the bank will approve to grant loans to it. In this way, CCB realizes the scale effect and gets the NPL ratio well under control. In the past, our loans to small and micro businesses increased only by 10 to 20 billion yuan per year. The number of clients grew by less than 10 thousand annually. The NPL ratio of such loans stood high, at around 7 to 8 percent. But in 2018, the newly granted loans to these enterprises surpassed 200 billion yuan; and in 2019, 300 billion. In March this year, CCB became the first commercial bank in China with standing inclusive finance loans to small and micro businesses topping one trillion yuan. Under the new model, the NPL ratio is kept below 1 percent. Our model is recognized by the market and shows that elephants can dance too.
Thirdly, it is an unstoppable trend that FinTech will fundamentally change the traditional way of inclusive finance. In the future, the Internet and big data technologies will be applied to a greater extent, focusing on the operation and credit conversion of data assets, and the buildup of platforms, scenarios, and ecosystems. Banks will tap into the mass markets and cultivate the grassroots economy to provide financial access for the very low end and far end of an economy. Financial solutions integrating social resources will come into being for social problems. Ladies and gentlemen, As Chairman of AFCA, I wish to thank you all for sharing your insights and cases. I am grateful for the trust, attention and support you’ve given to AFCA, and the important contributions you’ve made to the development of inclusive finance in Asia. I firmly believe that this meeting will be a new starting point, and AFCA will continue to play a bridging rolein deepening our cooperation. Let us work together and contribute our wisdom and strength to achieve more balanced and sustainable financial inclusion.
Thank you!
