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> Posted by Panthea Lee, Principal, Reboot

The Investing in Inclusive Finance program at the Center for Financial Inclusion at Accion explores the practices of investors in inclusive finance. Across areas including risk, governance, stakeholder alignment, and fund management, this blog series highlights what’s being done to help the industry better utilize private capital to develop financial institutions that incorporate social aims.

Citizens at the bottom of the economic pyramid in China lack even the most basic means to save for their children’s education, make purchases on credit, protect their homes through insurance, and send and receive money. Financial exclusion prevents many of them from realizing their potential and improving their livelihoods.

How can better financial services be designed to meet their needs?

With the support of the Institute of Money, Technology, and Financial Inclusion at the University of California at Irvine, Reboot undertook a study to understand the daily lives of China’s marginalized and answer this question.

We learned that the issue of financial exclusion in China has come to the fore relatively recently and that informal financial services have proliferated to meet the needs of these populations. We concluded that by understanding informality China could “get it right” in deploying market-based financial services targeting the country’s most vulnerable citizens.

Currently, 64 percent of China’s rural population is “unbanked” – i.e. they do not have an account at a formal bank. Over the last five years, China’s “Big Four” banks have closed a combined 30,000 branches in poor and rural regions, as a result of market pressures and an increasing focus on high-margin, low-risk populations. On average, rural residents have 0.36 banking outlets per 10,000 people, far below the national average of 1.34. Even in urban areas where banking outlets are numerous, services are designed for middle- and upper-middle class markets, providing low income residents little utility at best and stigmatizing them at worst.

Financial exclusion for these populations is compounded by a weakening of the social safety net. Retirement benefits, which were formerly provided by the state, have declined to a point where many need to supplement them with personal income. Workers who suddenly lose their jobs have a difficult time seeking social subsistence payments.

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Credit Suisse is a founding sponsor of the Center for Financial Inclusion. The Credit Suisse Group Foundation looks to its philanthropic partners to foster research, innovation and constructive dialogue in order to spread best practices and develop new solutions for financial inclusion.


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.