Editor's note

Recently, CAFI conducted an in-depth survey on the status quo of small-loan companies, and wrote a research report titled "The Status quo and Policy Suggestions of Small-loan Companies". Based on the findings and social development and business sustainability as the principle line, the report discusses the contribution of small-loan companies in the development of inclusive finance, focuses on analyzing the risks of small loans, identifies the sources of risks, and puts forward policy suggestions on this basis. From this period case, our "insight" column will be published the excerpts of this report to the readers.

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The CPC central committee and the state council attach great importance to the role of small and micro enterprises in the national economy and have introduced a series of policy measures to support the healthy development of small and micro enterprises. However, China Academy of Financial Inclusion (CAFI) of Renmin University of China observed that the financing difficulty of small and micro enterprises has not been effectively solved. In fact, there are a number of financial services, such as small loan companies which dedicated to the credit services of small and micro enterprises have made corresponding contributions while did not get the support they deserve, because people have a certain prejudice against such institutions.

Small-loan companies are established in accordance with the guiding opinions on the pilot projects of small-loan companies (No.23 [2008] issued by the China Banking Regulatory Commission CBRC and the People’s Bank of China) (hereinafter referred to as "article 23"). Without absorbing deposits, they mainly serve the customers whose business scope are "three-agriculture: agriculture, countryside and farmers" with the capital of shareholders, and have the characteristics of self-financing and self-risk. Over the past decade, they have accumulated rich experience in serving “three agricultures” and small and micro businesses.

In the early stages, the service model of small-loan companies was traditionally face-to-face. While small and micro businesses and “three agricultures” customers are small and scattered, leading to high costs, complicated procedures and slow lending. Some of small-loan companies have made full use of their innovative advantages to apply big data, cloud computing, artificial intelligence, Internet and other digital technologies to financial services, forming an online model, which not only greatly reduces costs, but also makes procedures more convenient and loans faster. Hence the concept of "Internet small loan" or "Internet finance" comes into being, and its essence is still a small loan company that does not absorb deposits.

To ascertain the status quo of small-loan companies (including the Internet loans), especially their roles, risk characteristics and factors in the development of inclusive finance, so as to provide scientific basis for formulation of relevant policy and regulatory measures, CAFI and China’s association of small loan companies set up research team of the status quo and policy suggestions of small-loan companies, and have investigated into the small-loan companies from March 2018, successively conducting the field research in Beijing, Guiyang, Hangzhou, Nanchong, Shenzhen, Chongqing, making the questionnaire survey for more than 399 small-loan companies, then formed an investigation report. CAFI also more and once invite experts and scholars from regulatory departments, industry organizations, market institutions and well-known universities to have closed-door communication on the role, business, financing, supervision and other topics of small loan companies.

The survey found that small-loan companies have indeed played a pioneering role in the development of inclusive finance, and the greatest achievement is to have promoted the development of FinTech and the widespread use of financial services. Its role in economic development also includes stabilizing employment, mitigating risks for small and micro businesses, and providing financial support for their development.

While serving small and micro enterprises, small-loan companies should also maintain their sustainable development. Small loan is a kind of risk business. To achieve sustainable development in business, small-loan companies must have strong core risk control ability. By analyzing the data of small-loan companies in the sample, it can be found that the overall risk of small-loan companies is controllable, and some of them have excellent risk control ability. Although the goal of small-loan companies and the regulatory authorities is to effectively control risks, the risk control of small-loan companies themselves emphasizes the business level, while the regulatory policies emphasize the risk control of the whole industry within the acceptable range.

Given that small-loan companies maximize their social benefits without harming business sustainability, the report argues that regulation of small-loan companies is different from that of traditional financial institutions. Most importantly, the principle of traditional financial institutions should be avoided to supervise small-loan companies with dual social and commercial missions and inclusive financial nature.

Interpretation of China's digital inclusive finance development report

(I) Introduction

(ii) The development of digital technology

(iii) The beneficiaries of digital inclusive finance

(iv) The challenges and future of digital inclusive finance

(v) Consumer finance

(vi) The development and influence of digital payment

(vii) Comparative analysis of the technical path of NFC payment and QR code scanning payment

(viii) The reasons for the slow development of NFC payment

(ix) Analysis of the reasons for the success of the qr code scanning payment mode

(x) Thoughts and Suggestions on the regulation of digital inclusive finance