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> Posted by Danielle Piskadlo, Director, Investing in Inclusive Finance, CFI

Ant Financial, the Chinese inclusive finance powerhouse founded by Alibaba Group, and Euronet Worldwide, a U.S. giant in the money transfer game, are in a bidding war over MoneyGram. Financially, this makes sense as the global remittance market is estimated at about US$600B and MoneyGram commands a market share of roughly 13 percent of the world’s largest remittance route, from the U.S. to Mexico.

When two large companies compete to acquire another large company you might hear about it on CNN Money and promptly move on to other thoughts. But this particular news struck me because it touches on three of the (many) insights about the future of financial inclusion that I took away from attending this year’s Harvard Business School – Accion Program on Strategic Leadership in Inclusive Finance just last month.

Big players will increasingly drive the financial inclusion sector moving forward while, in the past, only small companies served the financial needs of the low end market. Microfinance has shown the poor to be a commercially viable customer segment, and as competition heats up, many big financial players are looking for ways to better tap into the commercial potential of new clients at the base of the pyramid. These big players have the deep pockets to innovate, experiment, and take the risks required to figure out how best to serve the billions of people still financially excluded. In addition to Alibaba’s Ant Financial, China’s WeChat, the social messaging app which connects over 800 million people, now allows for money transfers.

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> Posted by Center Staff

A schoolboy looks at an electric light bulb powered by M-KOPA solar technology, as it illuminates his home in Ndela village, Machakos, Kenya.

2016 was the hottest year on Earth since records began in 1880. For those of us who work in financial inclusion but are fearful about our lack of progress in combating climate change, the following is a spot of good news: at the recent World Economic Forum Annual Meeting in Davos, Ant Financial and the United Nations Environment Program launched the Green Digital Finance Alliance.

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> Posted by Jeffrey Riecke, Communications Specialist, CFI

Does a speeding ticket help predict whether you will pay back a loan? While this might seem like a stretch, it may not be as farfetched as it sounds, at least in China.

China’s government is piloting a new ‘social credit’ scoring system that takes into account a diversity of financial and nonfinancial factors and behaviors. The financial ones are familiar – being delinquent on payments for insurance or social security. The nonfinancial ones are potentially troubling, and include, to name a few, traffic violations, jaywalking, dodging metro fares, violating the country’s family planning rules, criticizing the ruling party, and neglecting your elderly parents.

The social credit system may be used to affect financial opportunities, like securing loans, as well as non-financial ones, like job offers, your child’s admission to schools, faster treatment at government offices, access to luxury hotels, and being able to buy transit tickets.

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> Posted by Tim Tsang, Positive Planet China

A need for formal credit in China

(click to enlarge)

Between 2011 and 2014, 180 million adults (aged 15+) became new bank account holders in China. Yet in 2014, only 9.6 percent of Chinese adults, or less than 110 million, actually accessed credit from a financial institution, which includes credit unions, microfinance institutions, and cooperatives as well as banks. The incongruity across such statistics highlights both the progress made and the challenges remaining on China’s path to a more financially inclusive economy.

The need for reform is as important as ever with China’s growing credit industry. During its economic slowdown, China has looked to spur growth through consumer spending and should continue to see consumer lending steadily grow. The rigidity and costliness of China’s financial institutions, however, have hindered addressing consumers’ growing credit demand, leaving a discernable credit gap. Instead, in a big way consumers have resorted to informal and nontraditional sources of loans. This largely holds true for both urban and rural borrowers, with roughly a third of Chinese adults borrowing in 2014.

Among China’s informal lenders, family or friends are still the most common for financing individual loans, but “shadow banking” institutions, most notably P2P and online lending companies, have cropped up in recent years to try to capture this untapped market. As less regulated institutions, these shadow banks almost uniformly offer higher-risk, high-interest loans, rather than provide a sustainable and transparent alternative to banks.

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The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.