By Zhibao SHAO
Vice-President, China Postal Savings Bank
I’m very pleased to participate in inclusive finance forum to discuss this very constructive topic of inclusive financial and social responsibility with you. Below, I will share with everyone three aspects:
1. The understanding of inclusive finance.
Inclusive finance is the concept by the United Nations raised in 2005 the International Year of Microcredit. Its basic meaning is: financial services those can timely and efficient manner to provide the required to all sectors and social groups with an affordable cost. Specifically, the connotation of inclusive finance has three main meanings. Firstly, inclusive finance is a vision. Everyone should have the right to equally access to financial services, whether poor or rich. Secondly, the inclusive finance is an innovation. Innovations should be carried out within the financial system innovation systems, institutions, products and services, etc., to reduce the cost of financial supply so that everyone has access to convenient and sustainable business financial services. Finally, inclusive finance is a liability. The needs of low-income people and small and micro enterprises and other "low-end customers" which is hard to cover by traditional financial services should be met, to enhance the service capability and service level of financial institutions.
The concept of inclusive finance is perfect, but the financial institutions, especially the large financial institutions are facing many challenges in the process of inclusive finance practice that epitomized by the "two high and one low". First, high risk. As the "San Nong" " and small and micro enterprises are naturally weak, lack of effective guarantee, coupled with rural credit system is imperfect, " San Nong" and small micro enterprises have high non-performing loan ratio. For example, rural credit cooperatives non-performing loan ratio in 2003 was 30%. In the first quarter of this year, the banking sector non-performing rate of small and micro enterprises had 0.5% higher points than that of the industry average. Second, high cost. Generally, a blank area of financial services is more likely in remote and poor mountainous whose geography is highly fragmented, inaccessible. If the provision of financial services is the establishment of networks, it will take high costs. In addition, compared with urban areas, a small amount of credit is demand in rural areas, and it shows a strong seasonal, and takes high cost of a single transaction. Third, low return. Although the " San Nong" and SMEs are at relatively high risk. But due to various reasons, formal financial institutions credit pricing cannot go up dramatically. many times it’s difficult to make loan pricing to cover risks and financial costs. Solving "two high and one low" problem from both ends of the supply, is crucial for enhancing sustainable business inclusive financial services
2. Postal Savings Bank’s Practice in Financial Inclusion.
Since the Postal Remittance Bureau was established in 1919, we have the mission statement as "would rather do better in tiny things that people dislike, would rather do satiable things than to pursue vanity". Since its establishment in 2007, the Postal Savings Bank has played full network advantage of covering urban and rural, finance advantage of large-scale, team advantage of grassroots level, puts the development of an inclusive financial reform and development in the first place to complete the mission of serving the "three rural", small and medium-sized enterprises and community, and gradually explores a sustainable development path of inclusive finance.
There are three lessons we can reflect from the growth of Postal Saving Banks.
First, building a risk management system can adapt to inclusive financial characteristics to solve inclusive finance "high risk" problem. On the one hand, relying on the network edge and professional team, we can use "soft information" to control risk. To adapt to inadequate "hard information" of " San Nong" and small and micro areas, we can give full play the Postal Savings Bank’s wide and popular characteristics to establish a set of empirical judgment, social reputation, connections and other "soft information" feature-based inclusive financial business risk management system. Postal Savings Bank has a total of 40,000 outlets, more than 70% are distributed in and below the county, full-time loan officers are more than 30,000 in all. They are long-term presence in rural areas, understand the people and are down to earth, and have innate and acquired advantages to access "soft information". On the other hand, through "building platform" with other stakeholders, we can achieve risk-sharing. We can give full play to the advantages of large commercial banks, continue to strengthen cooperation with the government, security companies, insurance companies, trade associations and other institutions, and create "bank government, bank security, bank insurance, bank enterprise, bank association" cooperation platform to crack difficult collateral problem.
Second, innovate service model can solve the inclusive finance "high cost" problem. In rural areas, credit and payment has relatively small settlement amount, bigger service radius, less collateral security, credit process should not easily reduce, and to reduce costs is mainly depending on new technology applications. In recent years, the Postal Savings Bank has continued to explore the use of mobile banking technology, innovated based financial service model, and effectively extended basic financial services to all segments of rural society. July in 2014, the Postal Savings Bank carried out mobile intelligent terminal financial services pilot in Fujian, Hebei and other places. Loan officer just used an intelligent mobile terminal (PAD), at the customer's home or outside fields, the survey, field photographs, online verification, credit inquiries, filing and other recording and collecting information work can be completed. Connected via 3G network with personal credit review and approval system, the background will real-time online approval, and make “get loan the day after applying” realizable. The whole process customers only go to the bank branch one time when they need be signed, it’s preliminary estimated the average time can be reduced by 30% -50%. Furthermore, through the use of photographs, positioning, second-generation ID card readers and other technologies in mobile intelligent terminal financial services, we can effectively identify false information, not only improve the lending operation efficiency, but also reduce the cost of financial services.
Third, using "small and great" strategy to solve inclusive finance "low return" problem. While developing inclusive finance, the headquarters of the Postal Savings Bank centralized power, through the use of centralized funds, supported national infrastructure, basic industries and other major construction projects. At the same time, we should increase financial innovation, and actively participate in the financial market business, by cooperating and promoting synergy with financial market business to provide important protection for inclusive finance commercially sustainable development.
As a large commercial banks, the Postal Savings Bank has subverted the traditional judgment of "big banks only for big business, small banks are more suitable for a small business" which industry and academia have always promoted, become inclusive finance leader and promoter, has been committed to enhance the ability to serve the real economy, and practice the social responsibility of inclusive finance development. As to the end of August 2015, the balance of the Postal Savings Bank agricultural loans was 720.8 billion yuan, in which 130.5 billion yuan was new, with an increase of 38.51 percent, 10.27 percent higher than the growth rate of all loans. Total payment of small micro enterprise loans was more than 2.4 trillion yuan, to help about 12 million small and micro enterprises to solve the financing problem.
3. Several revelations of the inclusive finance development.
How to achieve sustainable development of inclusive finance is still a worldwide problem. The Postal Savings Bank’s successful practice of inclusive finance development, is benefited from the following four "insisting" points.
First, we should insist on being a sustainable business. The Postal Savings Bank insists on the "One body, two wings" strategic positioning, with seeing the company business and financial markets business as "both wings", joint development of inclusive finance, continues to strengthen the commercial sustainability of inclusive finance. Despite widespread inclusion is the most essential attribute of inclusive finance, but inclusive finance is not the same as universal service. Inclusive finance is emphasizing inclusiveness the time to meet sustainable business, which is an important attribute of inclusive finance to be distinguished with financial transfer payments, public interest organizations and so on. From international experience, inclusive financial systems those run effectively are basically able to achieve sustainable business, such as the Grameen Bank, the Bolivia Microcredit System, etc.; on the contrary, inclusive financial systems those who can not achieve sustainable business are often in trouble to continue, and will ultimately stray from their original missions of achieving financial inclusion.
Second, we should insist on innovation and development. The Postal Savings Bank, through franchise organizations, professional team and exclusive products, combined with the huge network of online and offline in innovative way to provide financial services to the "three agriculture", small and micro enterprises and the communities. Inclusive finance services mainly focus on scattered farmers and small and micro enterprises, so the business is unique. Therefore, compared with traditional financial innovation, inclusive financial innovation has its own characteristics, products and services not only need to meet the "short, small, frequent, urgent" requirements, but also be able to effectively respond to industry challenges against the weak nature risks and pledge missing. Thus, in terms of inclusive financial development, innovation should be comprehensive, involving not only the institutional innovation and product innovation, but also the system innovation and technological innovation. Currently, the Postal Savings Bank is actively embracing the "Internet+", relying on a new round of IT planning, ready to build big data and cloud computing platform. At the same time the layout of rural e-commerce platform is speeded up to construct O2O inclusive financial service network.
Third, we should insist on sound operation. To work on inclusive financial business, compared with the general commercial banking business, there are three significant risk characteristics, namely easily form credit risk, often come out operational risk and easily lead to operational risk. To effectively solve the problem of inclusive financial high-risk development and difficult management, the Postal Savings Bank adheres to the guiding ideology of "studying risks is prior to starting-up business to achieve risk management and business development parallel promoting", focuses on International Experience, from cultural construction, credit technology, personnel management, compliance construction, system support and other aspects and do a comprehensive risk control of inclusive finance. As of the end of August this year, non-performing loan rate was 0.81 percent, only about half the average level of the banking sector.
Fourth, we should insist on win-win cooperation. In the development of inclusive finance, facing a diversified and multi-level financial needs, any financial institution can not "conquer the world". The Postal Savings Bank has always adhered to an open attitude for the development of inclusive finance, focused on strengthening cooperation with other financial institutions, specially emphasizing on organic binding scale advantages and professional advantages of large banks with the characteristics of various agencies to achieve risk-sharing and win-win cooperation.
These are my practice experience of the development of the Postal Savings Bank inclusive finance sharing from industry. At present, Chinese rural credit system is imperfect, risk-sharing mechanism has not been established, so it’s necessary that the government further develops the policy-oriented role, optimizes the ecological environment of inclusive financial development, and encourages more commercial financial institutions to participate in the inclusive finance services.
Inclusive financial development path is in line with the common aspirations of human development, although the road twists and turns, but it has a bright future. I believe that through the exchange and communication, we will gain something and be enlightened.