Financial services for MSMEs: go above and beyond

Compared to traditional finance, inclusive finance is tailored to micro, small, and medium-sized enterprises (MSMEs) and vulnerable groups, and it needs to comply with requirements of risk control, credit investigation, and commercial sustainability. Moreover, inclusive finance practitioners must be patient and understand clients’ needs. They need to take an out-of-the-box approach to provide services above and beyond. According to many executive directors of the Inclusion Club, this is how inclusive finance should serve MSMEs. After we paid a visit to Zhongshan Xiaolan Rural Bank, this concept left an even deeper mark on us.


Founded in 2018, Zhongshan Xiaolan rural Bank is the first village bank in Guangdong with rich experience in serving MSMEs and new citizen groups. According to its staff, the Bank has issued loans totaling 29.479 billion RMB by the end of 2022, 60% of which were used to boost local MSMEs in the real economy.


As a special program of Inclusion Horizon, the workshop is themed “Challenges and future trends of rural finance”. Prof. Xiugen Mo, moderator of the workshop and Vice President of Chinese Academy of Financial Inclusion (CAFI) engaged in a lively discussion with a number of professors, including Duoguang Bei, President of CAFI, Sheng Bao, Director of New York Institute of Finance (NYIF), Xuelong Zheng, Deputy General Manager of Small Business Financial Service Center of Hubei Bank, Tongtao Cheng, General Manager of Weplus, Chaoyang Huang, Chairman of Zhongshan Xiaolan rural Bank, Hua Cheng, Associate Professor at the School of Economics of Renmin University of China (RUC), and Dexiang Chen, Microfinance expert and independent researcher.

The participants discussed the following topics: the impact of digital technology and information sharing on inclusive finance and rural finance, the mismatch between real financial needs and financial resources on the ground, O2O business in inclusive finance, sustainability of inclusive finance, and the pathway for achieving economic and social benefits.

Sheng Bao saw enormous room for improvement for financial institutions that focus on local communities and provide attentive services but noted a yawning talent gap for those who have a passion for inclusive finance. He suggested that regulators should provide more support and differentiated policies for microfinance and encourage market competition. In doing so, inclusive finance and rural finance will breathe more warmth and wisdom.

Hua Cheng talked about Japan’s practices in rural finance, where the Japan Agricultural Cooperatives served as an important organization to provide a full range of support for farmers including financial services. Farmers and MSMEs in Japan only need to focus on their business operations, because their regular financial needs can be met easily.

According to Dexiang Chen, rural finance is of the people, by the people, and for the people. Instead of following rigid rules, service providers should offer a wide range of fundamental services by taking into account local customs and practices, so as to improve credit awareness and financial literacy. At the grassroots level, a large number of employees are needed to reach out to local communities. They are encouraged to communicate with customers in local dialects and slang and help them out like their neighbors with their financing and marketing difficulties and even farm work, if necessary, during busy farming seasons. The warmth of the helping hand is not easily conveyed by digital technology.

Based on the experience of its bank, Chaoyang Huang believes that financial professionals serving MSMEs are also disseminators of financial knowledge. Many MSMEs do not have financial statements, and some are not even transparent or do not follow standard procedures. So, they have to teach them all the basics, including the importance of bank transfers and credit lines and the consequences of default, and keep them posted on the supporting policies and tax incentives of the state. Account managers of inclusive finance should be familiar with all the above-mentioned information and they take on many social responsibilities beyond financial ones.

At the same time, Mr. Huang also stressed that account managers need to conduct onsite investigations to determine whether the financial status of their customers is healthy, sub-healthy, or unhealthy. It is the core of risk control in microfinance.

Xuelong Zheng argued that although from the perspective of bank management, account managers of microfinance may not be as effective as corporate account managers in terms of credit growth and interest income, they made significant contributions to other aspects, so they deserve more diverse evaluation criteria. For example, the high value-added contribution of microcredit to the economy is reflected in their low capital consumption, long-term investment in the development of the basic customer group, and their contribution to small, decentralized, and non-cyclical loans.

In the concluding remarks, Prof. Bei highlighted the importance of well-defined roles of large banks, small banks, cooperative finance, and digital finance in serving the main customer base of inclusive finance. He called for competition among these institutions to better tackle the challenges faced by inclusive finance and rural finance. Moreover, after conducting visits and research, it was found that many frontline inclusive finance practitioners not only focus on business activities but also engage in financial literacy projects, thereby facilitating mutual growth between financial institutions and their customers and contributing to the overall financial health and high-quality development of inclusive finance.