Building an inclusive financial sector in China

After nearly fifteen years of piloting microfinance in China through a number of parallel and successive projects, UNDP is gearing up for the next phase of extending access to financial services to all people in all areas of China.

This initiative will take as its starting point the vision of an inclusive financial sector, which was a key result of the 2005 International Year of Microcredit. This vision is based on the increasing awareness of the importance of financial services for human development as well as the demonstrated reliability of poor and low-income clients.

It is also shaped by the observation that, in China much like many other countries, banks and microfinance institutions (MFIs) tend to have very different priorities.

Banks put a strong emphasis on maximizing financial objectives, and avoid poor and low-income clients perceived to be an impossible market where you can’t make a profit.
MFIs, on the other hand, often stress their social objectives at the expense of financial ones, which means that they have difficulty achieving the scale and long-term sustainability necessary to make a difference for millions of poor and low-income clients.

The next phase of UNDP support will be founded on the increasing global evidence that the best strategy to provide poor and low-income clients with access to financial services is for a wide variety of providers to see the need to join social and financial objectives into a “dual bottom line”.

The new UNDP China inclusive finance programme will catalyse the creation of new types of rural financial institutions that serve poor and low-income clients in a commercially sustainable way to demonstrate the vast untapped market potential of the unbanked.

The initiative will also bring a variety of stakeholders together in a series of focused dialogues to formulate a national strategic plan on making China’s financial sector more inclusive. This process will let all actors who play a role the financial and microfinance sector jointly identify the main challenges to inclusiveness and jointly formulate solutions based on research and discussion.

The aim is to create a strong, consistent policy environment that both ensures regulatory prudence and gives practitioners the conditions they need to release a vibrant financial sector that includes all regions and income groups of China.

If you want to know more about the UNDP China microfinance portfolio, please contact Mr. Peter Zetterstrom, Programme Manager, at peter.zetterstrom@undp.org.