The Green Paper Interpreted by Dr. Mo Xiugen: Inclusive Finance for Inclusive Growth and Sustainable Development


Inclusive Growth and Sustainable Development

This year's Green Paper connects the theories at the macro and micro levels by focusing on some intrinsically linked issues, such as how Inclusive Finance embodies inclusiveness and how to achieve sustainable growth in a responsible and healthy way. The concept of sustainable development has been proposed by the United Nations for many years and has been attached great importance by China too. As we understand it, the concept invoices the following two core aspects.


First, the use of resources by current and future generations. Current generation believe that they have a lot of resources at their disposal. But if the resources are used up, future generations will have nothing to improve their lives. The shortage of resources, and more importantly, how we used these resources led to concept of sustainable development and later it has been gradually extended to other fields. Since future generations cannot argue with us, it is our responsibility to promote sustainable development.

Second, sustainable development is also about equitable development among different groups in our generation. In response to the fact that some people occupy more resources than others, the concept of inclusive growth was proposed to be foundation of sustainable development. Why? Development and growth are different concepts: growth is the precondition for development; apparently, without a bigger pie, we cannot simply grab someone’s slice and give it to others. We need to achieve balanced development in growth. But we need inclusive growth; otherwise, some peoples will be left behind. Therefore, inclusive growth is the foundation for sustainable development.

Why is the current growth is not inclusive? Through researches we found that inclusiveness is prone to be excluded by social factors such as economy, resources, gender, race, etc., and more importantly, by the inequality in financial opportunities. In economic growth, the lack of labor, capital or natural resources will affect inclusive growth. When it comes to the situation of China's countryside, one question that has been raised often is why the countryside is destitute? The main reason is the loss of labor and financial capital.

In terms of financial capital, some banks use rural financial capital to invest in urban development. This is financial exclusion and is clearly not inclusive growth. Financial inclusiveness is an important part of inclusive growth, and this is why financial inclusion is important.

In terms of human capital, capacity building, especially financial capacity building, is an integral part of financial inclusion. Financial inclusion is not only important for economic growth but also for sustainable development. Therefore, inclusive growth is the most important feature of finance inclusion.

Healthy Finance

The vision of "Good Finance, Good Society", put forward by president Bei of CAFI, always reminds us to distinguish the good finance from the bad. Bad finance will certainly lead to bad social results, for example, unbalanced and unsustainable growth. But what is the good finance? The good finance must yield healthy results for consumers. As to financial health, what matters most is the financial health of consumers and households; the financial health of SMEs matters too. The most basic requirement of financial health firstly is to develop economy and human capital and secondly to pursue a better life and to develop financial inclusion. All the above are discussed in detail in the Green Paper, and so are the indicators of financial health. The Report believes that products and services of healthy finance shall do no harm.

Responsible Finance

The responsibility of healthy finance lies not only in the client but also in the supply side. In 2010, India met some problems in micro-finance. The problems were mainly caused by consumers, but supply side was not blameless for the oversupply. And now some young people in China have a serious overdraft problem. Generally speaking, the supplier is liable to offer healthy financial services, as they usually more information. Therefore, financial transparency is not only about telling consumers what the financial products are, but also telling them the benefits and harms thereof.


How to be responsible? The principle of "customer-oriented" is not our invention, but has not been widely discussed. Recently, I visited two counties in Shaanxi and Hunan for two weeks and interviewed 60 families and some owners of MSMEs. I learnt a lot. Our interview results will be mentioned in the report on "micro financing for households". We also find some overlapping of disadvantaged groups. For example, many owners of MSMEs are also a vulnerable group; they may also be small holders and/or self-employed, and/or micro e-commerce owners. When they are not farming, they sell their products online or find some temp jobs.

The financial products and services we offer should be consider their overall needs. For example, the products we offer should not just consider their business needs, but also their family needs. After I interviewed many women owners, we found that the reason they run small shops are varied. Some hope to find something to do and others hope to support their families. Their finances are usually mixed with other family members. So, when designing the products, it is important for financial institutions to be "customer-oriented" and consider their overall needs.