Li Yang: Four Key Points in Defining Inclusive Finance
Created On : 2018-08-16    Views : 63

On August 5, the 1st China Inclusive Finance Innovation and Development Summit was held at People's Daily. At the Summit, Li Yang, president of the National Institution for Finance & Development and member of the Chinese Academy of Social Sciences (CASS), said that the development of inclusive finance must follow the right path, and the four key points of inclusive finance must be seriously and profoundly understood and implemented in earnest. First, inclusive finance must be an affordable cost; second, there must be real demands for financial services; third, financial services must be provided with dignity; and fourth, appropriate and efficient financial services must be provided.


The following is the transcript of the speech:

Distinguished guests, ladies and gentlemen, good morning. First of all, on behalf of the National Institution for Finance & Development, one of the Summit sponsors, I would like to express my heartfelt thanks and warm welcome to your presence.

The National Institution for Finance & Development is one of the first batch of 25 national think tanks approved in 2015 by the Central Government Commission Office for Comprehensively Deepening Reform, and the only financial think tank among them. Despite the many things to study in the field of finance, we regard inclusive finance as an indispensable part. This is because we recognize that nowadays, inclusive finance must be our dominant profession, rather than a thing to do after earning money. It is a natural human right for all people to obtain dignified financial services. We must contribute our power to realize this natural human right.

The words “inclusive finance” can be separated. What I want to emphasize is that it emphasizes popularization, not concessions. There are big differences between the new concept and the old one. When inclusive finance was first proposed, most people in China's financial sector were not familiar with this concept. Although we know about small loans and SME loans, we didn't know such a special concept as this. I still clearly remember that after the decision of the Third Plenary Session was just published, we received many phone calls asking what inclusive finance is. I said I just barely understood the concept, but did know its deep meaning. To make it clear, we established several teams that specialized in inclusive finance. Many of today's achievements actually derive from our teams’ accomplishments.

Developing inclusive finance must follow the right path. To truly push inclusive finance on a healthy path, we need to have a more serious and profound understanding of the concept of inclusive finance and put it into practice in earnest. Inclusive finance has a strict definition, which includes four key points.

The first key point is affordable cost. It involves providers, like institutions here that offer inclusive financial services. First of all, finance must be affordable, unlike poverty alleviation and social welfare that are unaffordable. The financial activity must first permit providers to have affordable costs.

The second key point is groups and individuals in need of financial services. That is to say, we need properly trained personnel to identify who has a real need for financial services. In reality, financial workers always meet people who want money and who say their financial services are not satisfied, and these actually need to be identified. We need to exclude those who do not have a real need for financial services, especially those who request financial support for improper purposes.

The third key point is provision with dignity. This point ought to be thoroughly implemented, but has been paid scant attention in the past. In the past, support to the poor and to poverty-stricken areas was sometimes offered via charity or by administrative means. In contrast, dignified services emphasize the market mechanism. So far, nothing can provide as much dignity to people as market trading can do, because the trading process is fair between both sides. During the further development of the socialist market economic mechanism, we need to understand that the nature of the market is fair and dignified. That is to say, inclusive finance must be market-oriented.

The fourth key point is to provide appropriate and efficient financial services. That is so say, you have to create some new products and provide them to people to really solve their problems. Therefore, innovation is a topic at today’s summit themed on inclusive finance. How to make innovations and create some effective financial products is an unremitting task.

Finally, I would like to lay emphasis on innovation. Because innovations require the latest technology, financial technology should be very useful in the field of inclusive finance. People are still unclear about what financial technology is after we integrate technology and finance. Today, with the help of this platform, we hope to make it clear before setting out to do it.

In fact, we can analyze financial technology in five points. The first point is big data that provides us with something that we could not find in the old days. Most importantly, we could only use some so-called “structured data” in the past, but can now get big data from plenty of unstructured real-time overall data. The second point is intelligence. If mass data cannot be analyzed and used, it will become garbage. At this time, financial technology also provides a means, namely artificial intelligence. It can systematize part of the intermediate information that could not be calculated and perceived in the past, by harnessing algorithmic and calculation force, and then find useful things. This is absolutely important to inclusive finance. The third point is the Internet, which involves communication, connectivity and access. That is to say, how to make it accessible to users. Interconnectivity is realized at two levels—the Internet and the Internet of Things. At the level of the Internet of Things, the entire field of finance will be changed a lot. The fourth point is distributed computing technology. Famous block chain is included in the distributed technology. However, it becomes currency trading in the field of financial technology at present. It will go astray. Our distributed technology is actually a set of confidential technologies or account books, and can replace our previous methods of collecting, sorting, preserving, disposing and distributing data. The fifth point is security technology. We are talking about inclusiveness and innovation today. Therefore, we must combine these technologies with the concept of inclusiveness, and broaden this road. I believe that China will make contributions to the world in the field of inclusive finance.

 (Li Yang is a member of the Academic Committee of Shanghai Academy)