The concept is simple. There is an enormous rural population in China, as well as blue-collar workers and other lower income citizens spread throughtout the country. These groups are badly in need of banking services and financing, be it for crop insurance in farming regions or access to loans to buy seeds for growing, or sending their children for higher education. The need for financing is equally urgent in cities, where nearly 20 million SMEs (small medium enterprises) in China are searching for capital to expand. These groups have traditionally been underserved by banks.
The Chinese government has recognized Fintech as a viable solution to solve this issue, and is eagerly encouraging this digital transformation. During a conference in Shanghai last month, chiefs from PBOC (People’s Bank of China), NIFA (National Internet Finance Association of China) praised the development of Fintech on the Mainland and promised more support for Inclusive Finance.
The government support is a push in the right direction. Financial institutions typically focus on the top 20% of wealthy consumers who control 80% of the country’s wealth. The financial inclusion market is considered a blue ocean. Even so, difficulties such as the lack of credit records and the high cost of going rural have always put big financial institutions off. Fortunately, the development of the internet and other similar technologies is transforming the space.
Financial affiliates of established players such as Credit Ease, Ant Financial, and JingDong Finance are already moving into inclusive finance. Alibaba’s Mybank said it would offer smaller loans than regular banks and focus on the everyday 'man-on-the-street' and SMEs. Yirendai.com under Credit Ease considers inclusive finance as a social responsibility.
Beyond the examples above, there are some other startups in China looking to enter inclusive finance:
Guangzhou-based PPmoney.com is one of China’s most used online wealth management and lending platforms. Their client focus includes blue-collar workers in China. On the asset side of the platform, PPmoney has developed four products for their customers: mortgage for 3C (Computer, Communication, Consumer Electronics) products, mortgages for vehicles, leasing for trucks, and cash loans.
The firm also developed a new risk management system that includes four core elements: Cloud approval, Robot learning, Big data and Anti-fraud. At a recent forum, Baoguo Chen, the CEO of PPmoney.com, who is also the official at Guangdong Internet Finance Association, urged banks and financial institutions to support innovation in banking to assist the low-income population.
Cashbus is another good example of a startup focusing on micro cash loans. It provides small loans for clients in need of cash for a short period before getting their monthly salaries. They created an efficient credit checking process to quickly approval a loan and satisfy borrower’s urgent money needs. Borrowers need not hand the company any collateral and can take out loans with by just providing their identification card and a cellphone number. The loans are approved in 20 minutes.
Should the firms above succeed, the development of inclusive banking services in the rural areas China is set to witness big change.