China’s banking regulator will require that the country’s biggest lenders establish financial inclusion departments before the end of the year, as part of ongoing efforts by authorities to more effectively channel capital towards the real economy.
The “Implementation Plan for the Establishment of Financial Inclusion Operations Departments by Large and Medium-size Commercial Banks” (大中型商业银行设立普惠金融事业部实施方案) recently issued by the China Banking Regulatory Commission sets a definite timeline for the establishment of financial inclusion departments by larger lenders by requiring their completion by the end of 2017.
The issuance of the implementation plan by CBRC follows the 2017 “Government Work Report” which points to the need to “encourage large and medium-sized commercial banks to establish financial inclusion departments…large state-owned banks must take the lead in performance, and implement differentiated assessment measures and support policies, in order to effectively ease the problem of finance being difficult to access and expensive for small-to-medium sized banks”
Agricultural Bank of China as well as the Postal Saving Bank of China had also previously established their own independent financial inclusion departments targeting the agricultural sector.
CBRC data indicates that the nationwide balance of loans extended to small enterprises was 27.8 trillion yuan as of the end of March 2017, for year-on-year growth of 14.4%, while the number of small enterprise loan customers was 13.63 million, for a year-on-year gain of 1.17 million.
The balance of agricultural loans was 29.2 trillion yuan for a year-on-year gain of 8.9%, while the basic financial services coverage ratio for administrative villages was roughly 95%.
A CBRC official said that the Implementation Plan provides a unified set of requirements for financial inclusion department operations with respect to capital, risk control and commercial operations, with a view to achieving long-term sustainable development of financial inclusion business.
While the Implementation Plan permits banks to establish financial inclusion services models based on their own customer bases, unique operating features and service advantages, industry observers note that the unified requirements of the plan will narrow the room for differentiated operation amongst commercial lenders.