2022 International Forum for China Financial Inclusion: high-quality development builds resilience and safeguards financial health

Organized by Renmin University of China (RUC), China Banking Association, National Internet Finance Association of China (NIFA), and China Micro-credit Companies Association, the “2022 International Forum for China Financial Inclusion” (hereinafter referred to as “the Forum”) was held from November 9 to 11 under the guidance of the People’s Bank of China (PBoC) and the China Banking and Insurance Regulatory Commission (CBIRC). 

With the theme of “Improving the financial health of the vulnerable”, the Forum focused on the topics of how to build the resilience of MSMEs and vulnerable groups against risks and help them achieve self-development since the pandemic broke out three years ago. It called for the attention of all sectors of society to financial health so as to achieve high-quality development of inclusive finance and economy.

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. CAFI has presented the research results in the Report of Financial Inclusion Development in China (2022), calling for a special focus on the accessibility of financial services for inclusive groups and joint efforts to enhance their wellbeing.

CAFI’s initiative has already received the attention of regulators. Not long ago, PBoC released the Analysis Report on Financial Inclusion Indicators in China (2021) on its website and introduced the concept of “financial health” in the report. At the Forum, Wenjian Yu, Director-General of the Financial Consumer Protection Bureau, PBoC, shared his views on how to focus on financial health to promote the high-quality development of inclusive finance. First, we need to improve the level of the development of financial inclusion and explore an overall planning and policy framework for financial health. Second, financial institutions should play an anchor role to provide more targeted financial products and services. Third, we need to enhance financial literacy and financial health awareness of consumers and better protect their financial rights and interests. Fourth, we need to strengthen the benign interaction between regulators and micro entities to establish a good monetary policy and stable environment for financial health. Fifth, we should improve relevant infrastructure, laws and regulations to provide institutional protection for financial health. Sixth, we need to establish a sound assessment index system and diagnostic tools to provide scientific measurement and standards for financial health.

Many participants shared their observations and experiences on how to build resilience against risks and enhance financial health at the Forum. Feng Liu, Secretary General of the China Banking Association, introduced the banking industry’s experience in product innovation and meeting the needs of new citizen groups in terms of housing and elderly care. Qiang Shan, Party Secretary of NIFA, said that high-quality development of inclusive finance at the new stage should focus on four aspects: digital applications, green development, ecology building, and responsibility. It is also necessary to give full play to due role of government, market, and civil society. Fei Wang, Party Secretary and President of China Micro-credit Companies Association, noted that micro-credit companies should focus on their main business and innovate on the basis of compliance to improve the financial health of the vulnerable.

To build a sound inclusive financial ecosystem, regulators and industry associations should play a guiding, regulatory and administrative role, and financial service providers should lend strong support as well. Internationally, business models that incorporate customers’ financial health outcomes have been translated from concept to wide applications. It requires financial service providers to focus on enhancing customers’ financial health while paying special attention to their own capacity building.

At the Forum, the Boston Consulting Group (BCG) released a White Paper on Smart Risk Control in Fintech Industry, which pointed out that the fintech industry is now facing more diversified risks which are more insidious, contagious, surprising and impactful. It is advisable that fintech companies should strengthen risk management at governance, mechanism, technology, and organization levels. Ant Group and other organizations participated in the discussion on this topic. Jie Jiang, head of the Risk Management Department of Ant Group, said that risk management is a guarantee for “innovating on the basis of what has worked in the past”, and their risk management philosophy echoes with the models recommended in the report, that is, to focus on the development of risk management system, tools and co-governance ecology.

In the inclusive financial ecosystem, micro businesses and vulnerable groups are consumers whose financial health requires particular protection. It is necessary to build a risk resistance system for low- to middle-income households to achieve inclusive growth. Inclusive insurance, which has not received much attention before, is discussed at this Forum. According to Jingguo Shang, Secretary General of the Insurance Association of China (ICA), insurance, as a buffer, should be accessible to the low- to middle-income group too. Yanli Zhou, Member of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC) and Former Deputy Party Secretary and Former Vice Chairman of the China Insurance Regulatory Commission (CIRC), put forward some suggestions to addressing existing problems in inclusive insurance. He calls on relevant departments to roll out guidelines to promote the development of inclusive insurance as soon as possible, establish a statistical system, enhance the industry data infrastructure and the oversight of inclusive insurance, work together to form a synergistic mechanism, and strengthen the inclusive insurance literacy.

To understand how insurance resilience of China’s different regions, the Swiss Re Institute (SRI) released a report on Insurance development resilience in China’s provinces at the Forum. It is the first time to construct a new SRI China Provincial Insurance Development Resilience Index for each province. The results show that provinces’ insurance development resilience levels vary widely, with index scores ranging from less than 20% to over 90%. Higher resilience provinces are mostly well-developed economies with higher risk exposure to financial and human-related risks. Medium-resilience provinces are mostly located inland and they typically need to improve risk protection for low-frequency but high-cost risks such as earthquakes. The lower resilience provinces are usually less developed economies, where all-round protection remains a top priority. Dr. Jerome Haegeli, who released the report, champions that integrating insurance into the local economic governance framework can help maximize the protection function of insurance and enhance social and economic resilience.

Economic and social resilience is a strong pillar for survival and thriving of our society. From laying out a long-term mechanism for capacity building to “safeguarding financial health”, and from building an inclusive financial ecosystem to focusing on the most vulnerable rural finance and inclusive insurance, CAFI has been dedicated to research on building the resilience of micro businesses and vulnerable groups, as part of its efforts to build a more resilient society. As Duoguang Bei, President of CAFI, said, “the financial health of micro businesses and vulnerable groups is not only an important indicator of the high-quality development of inclusive finance but also a matter of overall financial stability and economic and social resilience. Financial institutions should take an active part in building an inclusive and resilient financial ecosystem in line with the vision of ‘Good Finance, Good Society’.”