Integrating financial health into the policy framework: an important sign that financial inclusion ushered in a new stage of high-quality development

As the COVID-19 pandemic wreaks havoc around the world for nearly three years, micro and small businesses and vulnerable groups such as flexible workers, pay-for-performance employees, the self-employed, and the MSEs, faced unprecedented challenges. In response, the Chinese Academy of Financial Inclusion at Renmin University of China (CAFI) has conducted a follow-up survey on more than 200 households and MSEs in Shaanxi, Hunan, and Shanghai over the past three years, analyzed data from more than 200,000 low- to moderate-income people, and introduced the concept of “financial health” and related assessment dimensions. According to the survey, although China’s vulnerable groups are financially healthy as a whole, there is still much room for improvement, and it is necessary that the whole society pay attention to financial health.

On November 9, with the theme of improving the financial health of the vulnerable, the 2022 International Forum for China Financial Inclusion (IFCFI) kicked off. This forum was supported by the People’s Bank of China (PBoC) and China Banking and Insurance Regulatory Commission and organized by Renmin University of China (RUC), China Banking Association, the National Internet Finance Association of China (NIFA), and China Micro-credit Companies Association. During the warm-up session, the Chinese Academy of Financial Inclusion (CAFI) officially released The Report of Financial Inclusion Development in China (2022) themed on “safeguarding financial health” (hereinafter referred to as the Report). According to the Report, with the high-quality development of financial inclusion, it is necessary to integrate financial health into the policy framework and enhance social awareness on the protection of financial consumers’ rights and interests and financial health, which will help to refocus inclusive finance in China from availability of financial services to the financial well-being of vulnerable groups.

At the release ceremony of the Report, Ms. Elisabeth Rhyne, former Managing Director of Center for Financial Inclusion at Accion (CFI) and Academic Advisor of CAFI, delivered a keynote speech entitled “Financial Health—A Global Movement”. Mr. Xiugen Mo, Vice President of CAFI, introduced the main ideas of the Report, especially the origin and definition of financial health. According to him, CAFI calls for social attention to “financial health”, a term originated from financial inclusion, which means the extent to which a person, family, or firm can smoothly manage their day-to-day income, absorb financial shocks, build a meaningful lump-sum for anticipated future expenses, and be in control of finances, which indicates good day-to-day management, resilience, and opportunities of economic entities.

Mr. Youping Yin, Deputy Director-General of the Financial Consumer Protection Bureau of PBoC pointed out that the Report, themed on “safeguarding financial health”, presents international, forward-looking, and up-to-date academic achievements. Specifically, it has three highlights. First, a distinctive and forward-looking theme. Promoting the high-quality development of financial inclusion is a systematic project for the sustainable financial development of China. As an advanced stage of financial inclusion, financial health can better reflect the political, people-oriented, and professional significance of financial inclusion. Second, well-structured and international elements. The Report has a clear and logical structure, beginning with the definition of financial health to the financial health of micro and small businesses and vulnerable groups with an in-depth analysis of households, MSEs, and suppliers. Third, profound academic achievements. Led by President Duoguang Bei, the CAFI research team has always been a trailblazer in China’s financial inclusion research. With sufficient data, elaborate cases, and in-depth analysis, the Report systemically puts forward the mechanism, environment, and principles for safeguarding financial health, which is of great significance for building up China’s financial health with high standards. As a new research topic, thorough, sound, and higher-quality financial health requires continuous efforts from academia, government departments, and people from all walks of life.

In the Q&A session, Ms. Yun Zhou, General Manager of Customer Experience and Protection of Ant Group said that as financial inclusion enters the high-quality development stage, financial services providers should incorporate the protection of financial consumers’ rights and interests and financial literacy into their corporate strategies and business models, so that the financial health of the firm and its customers can grow together. Only when a firm can continuously deliver value to customers and improve their well-being, its products will be favored by customers for a long time, and this can help financial inclusion to move from “accessibility”-focused to “financial health”-focused.

During the panel discussion, Dr. Duoguang Bei explains the importance of financial health. According to him, under the current economic circumstances, it is necessary to enhance the financial health awareness of residents, households, and MSEs, and advance financial health-related works, which can promote the high-quality development of financial inclusion and help financial consumers, especially MSEs, to better cope with operation difficulties caused by the pandemic. In this way, we can better protect the rights and interests of financial consumers and stabilize the financial environment.

Mr. Chengyu Bai, Division Director of China International Center for Economic and Technical Exchanges and Director of Project Management Office for UNDP/China SDG Finance Project, introduced international experiences in financial health. According to him, the cooperative economic system across the globe in both urban and rural areas, a non-profit financial institution, enjoys extensive experiences and is playing an effective role in financial health education. Collaborative finance is also an essential part of the financial system together with policy-based finance and commercial finance. The well-known “credit union” with a history of 170 years is a member-owned nonprofit financial cooperative established by residents (mainly urban residents) on a voluntary basis. Its purpose is to serve its members, to help them solve day-to-day financial problems by providing services such as savings, credit, and insurance, rather than to maximize profits for shareholders. In essence, its original purpose and founding mission is to achieve the financial health of its members, so it regards financial literacy as one of the primary principles and core businesses.

Mr. Rui Cheng, Vice President of Ping An Inclusive Finance Research Institute, shared his views on financial institutions and financial health. He pointed out that financial health can contribute to the sustainable development of financial institutions from three aspects. First, it can enhance their sustainable operation, and thus improve the quality of their credit assets. Second, studies on the financial health of MSEs can enrich our insights into MSEs customers from different perspectives. Third, it can help financial institutions to provide more targeted and diverse services and meet the urgent needs of their customers by providing diversified value-added services as well as other financial services. In this way, it can increase customer stickiness and enhance their satisfaction with financial institutions.

Mr. Dong Wang, Senior Director of Corporate Communications and Head of Financial Inclusion & Education of Visa China said that Visa believes that the most important financial instrument is not a product, but knowledge. Financial literacy is the entrance ticket for individuals to get access to and benefit from the formal financial services system.

Mr. Jian Yu, Executive Vice President of Yicai Research Institute expressed his expectations for financial services providers. He said that financial institutions have the ability to take the initiative to improve the financial health of their customers and become the promoters and builders of a healthy financial ecology. With professional product design, patient attitudes, and a sense of social responsibility, those financial workers working on the ground can help farmers to obtain, put into good use, and repay loans. While improving the financial health of customers, they also help to increase the target value of inclusive financial services.

After the release ceremony, the two-day forum: Improving the Financial Health of the Vulnerable—2022 IFCFI was officially opened on November 10. In the panel sessions, about 70 guests engaged in-depth discussions on topics such as “The Future of Rural Finance”, “The Financial Resilience of MSEs”, “What Financial Services Do New Urban Residents Need?”, “The Sustainable Development of Inclusive Insurance”, “Data Governance and Financial Innovation”, and “Green Inclusive Finance in the Context of Digital Economy”.