Speech at the International Forum for Financial Incusion

By ZHOU Mubing


Distinguished guests,


Good morning!


It is a great pleasure to attend the forum. The theme, “good finance, good society”, fits well with the principle of financial inclusion. As China’s banking regulator, the CBRC has been working on guiding and promoting China’s banking sector to foster the concept of financial inclusion and develop the cause. Providing financial services for small- and micro-businesses to boost their development is one of the key components of financial inclusion. I would like to share three points with you—the achievements, challenges and future of China’s banking sector in serving small- and micro-businesses.

I. Tangible achievements

The CBRC always adheres to positive incentive-oriented regulation, uses differentiated regulatory policies to stimulate the endogenous impetus of the banking sector to serve small- and micro-businesses. By the end of June, 2015, the loans have achieved the goal of three “no lower than”: the growth rate of loans to small- and micro-businesses was no lower than the average growth rate of all loans, and the number of accounts receiving loans and approval rate for loan application were no lower than that of the same period last year.

The size of loans to small- and micro-businesses is growing steadily. By the end of June this year, the loan balance to small- and micro-businesses has exceeded RMB 22 trillion yuan, up by 15% year-on-year, and registers a two-fold increase from that at the end of 2010.

The coverage of financial services is extending. The number of small- and micro-businesses receiving loans is 11.51 million, up by nearly 9% year-on-year, and accounts for more than 20% of all the small- and micro-businesses. The coverage rate of comprehensive financial services for small- and micro-businesses in provinces (and municipalities and districts) is over 70%.

Approval rate of loans increases significantly. The approval rate for small- and micro-businesses nationwide exceeds 91%, up by 3% year-on-year.

In promoting financial services for small- and micro-businesses, there are five best practices I would like to share with you.

First, forming a financial service supply system with multiple drivers. China has basically formed a multi-layers, diversified organizational system of banking institutions, which provides financial services for small- and micro-businesses suitable to their scales, developmental stages and financing capabilities. Outside the conventional banking system, new types of financial institutions such as small loan companies and P2P online loan companies are booming, which diversify the forms of financial institutions and become an important supplemental solution to relieving the difficulties for small- and micro-business to get financed.

Second, building an independent and efficient mechanism. The special demand for financial services from small- and micro-businesses requires the shift from the previous, expansion-oriented growth pattern and an overall haul of the internal organization. Under the regulatory guidance, the banking sector set up effective mechanisms and systems of financial services for small- and micro-businesses including score card-oriented loan approval, differentiated tolerance for non-performing loans, and waived liability for due diligence of staff.

Third, carrying out extensive and flexible financial innovation. The CBRC encourages the banking sector to innovate products and service. Financial innovations such as standardized “credit factory”, Internet Big Data and new terminals such as mobile banking and online banking keep coming out. Especially the innovation-driven businesses and start-ups that used to have the greatest difficulties in getting financed get support from these innovations and become emerging forces implementing the national strategy of entrepreneurship and innovation.

Fourth, improving information sharing and credit enhancement. The crucial reason for the difficulties in financing for small- and micro-businesses is lack of information and credit. The CBRC are working with the State Administration of Taxation to build an information linking channel that converts tax records of small- and micro-businesses into bank credit. Means of credit enhancement are also diversified. Bank-insurance cooperation such as guarantee insurance for small loans and credit guarantee insurance have been on pilot in many areas. Financing guarantee industry is also playing an ever more important role.

Fifth, emphasizing both the market and the government. Supporting small- and micro-business through financial services is a common cause undertaken by the government, businesses, social groups and financial institutions including banks. The market and the government should work in cooperation so as to jointly deepen and consolidate financial services for small- and micro-businesses and build the services into a long-term project.

II. New Challenges

As China’s economy enters the “New Normal” and the economic growth slows down and industrial restructuring upgrades, small- and micro-businesses are going to diverge more quickly. The problem of expensive and inaccessible financing shows new characteristics. Financial services for these businesses also face new challenges.

First, the challenge of adapting to a complex and volatile market. Under the new situation, supersession of small- and micro-businesses intensifies. Banks face the challenge of identifying quality clients among the sea of small- and micro-business, providing targeted and comprehensive service and managing post-loan risks.

Second, challenges of balancing business sustainability and social responsibility. With narrowing interest spread and fiercer competition from social financing, the banks face higher fund price and the social responsibility for small- and micro-businesses with less derivative deposit and weaker negotiating power, which requires pricing mechanisms that realize both social and business goals.

Third, challenges from improving risk management capabilities. Amid the fluctuating domestic and international economic environment, credit risks of small- and micro-businesses have been accumulating and bursting out, during which shows the alerting and thought-provoking incompetence in risk management philosophy, institutions, etc. of banks.

Fourth, challenges from strengthening regulatory incentives. The CBRC has always been studying how to maintain the continuity of polices while innovating regulatory approaches to intensify regulatory incentives and make them more targeted so as to encourage banking sector to better support small- and micro-businesses.

Fifth, challenges from optimizing policy coordination mechanism. Financial services for small- and micro-businesses are a complex, systematic project that requires effective policies from taxation, justice, regulation, etc. The supporting policies have become systematic, but more coordination is needed.

III. Improving the financial services for small- and micro-businesses

Looking forward, financial services for small- and micro-business are challenging yet promising. The CBRC will continue to guide the banking sector to advance the undertaking.

First, supportive policies should be more targeted. For example, state classification of enterprise types should identify the real vulnerable small- and micro-businesses, and fiscal polices such as loans with discounted interest should replace direct subsidies so as to guide financial resources to small- and micro-businesses that need financing the most.

Second, new type of financial institutions should make more progress. The CBRC has been encouraging privately-owned banks to provide targeted services for small- and micro-businesses, and considering how to regulate and guide small-loan and P2P companies that reflect the inclusion and diversity of finance to supplement traditional banking sector and better serve the real economy.

Third, products and services should be more innovative. New technologies such as the Internet have helped improving efficiency and lowering cost, and banks should further integrate the cutting-edge technologies with products and services to tap more client resources and capture effective demands for financing, and therefore helping more small- and micro-businesses.

Fourth, coordinating service models. Direct and indirect financing should be complementary as financing channels. The CBRC also encourages banks to offer targeted equity and claim financing for high-tech small- and micro-businesses in their infancy. Businesses, governments, banks, insurance companies and guarantee companies should shoulder the risks together. Guarantee companies with strong competence and government back-up should be encouraged.

Fifth, giving more weight to social responsibilities. Small- and micro-sized businesses should have entrepreneurship; industry associations should help coordinate banks and businesses; commercial banks should enhance support for small- and micro-businesses and local governments should provide an enabling environment for such financial services.
China’s financial services for small- and micro-businesses have achieved tangible results. The CBRC would like to work with all stakeholders in developing financial inclusion and small- and micro-businesses.

Thank you.


Copyright: China Banking Regulatory Commission
ADDR:Jia N0.15 Financial Street, Xicheng District, Beijing, 100033