{"id":21316,"date":"2016-05-11T11:30:39","date_gmt":"2016-05-11T15:30:39","guid":{"rendered":"http:\/\/cfi-blog.org\/?p=21316"},"modified":"2018-09-21T17:28:06","modified_gmt":"2018-09-21T17:28:06","slug":"financial-education-in-china-challenges-and-lessons-in-an-embedded-model","status":"publish","type":"post","link":"https:\/\/cfi.accion-staging.flywheelsites.com\/financial-education-in-china-challenges-and-lessons-in-an-embedded-model\/","title":{"rendered":"Financial Education in China: Challenges and Lessons in an Embedded Model"},"content":{"rendered":"
> Posted by\u00a0Tyler Aveni, Positive Planet Co-Country Director (China)<\/em><\/p>\n Through the support of Diageo\u2019s Plan W<\/a> initiative, Positive Planet\u2019s three-year women\u2019s empowerment project Banking on Women<\/em> has provided financial education to more than 8,000 women across Huimin Dongfang Microcredit Company<\/a>‘s client network in Ningxia Autonomous Region, China. The project\u2019s curriculum, which is based in the core financial concepts of savings, risk protection, and digital finance, is intended to empower women in the household and community through increased financial decision-making power. With the project more than two-thirds completed, Positive Planet has just published a case study that explores the project team\u2019s experience in working to build the financial capability of rural Chinese women.<\/p>\n As written here before<\/a>, China\u2019s rural women stand to greatly benefit by being introduced to financial concepts and related services. However, China\u2019s government has yet to establish a national strategy for financial education that clearly looks beyond urban residents\u2019 financial capability needs. (Current efforts mostly cover<\/a> security precautions for traditional banking, anti-fraud measures, counterfeit currency awareness, and illegal investment prevention.) Serving rural residents and their unique set of circumstances and needs will require a greatly expanded financial capability-building offering. For such an expansion to work well, it will need to include programming that looks at the rural population separately. Further, implementation for rural programming should lean on the experience and opinions of diverse local groups and township government offices. Unique cultures, language dialects, and market distinctions across China\u2019s many regions make one-size-fits-all financial educational content less effective. Central planning and support play a crucial role, but resource design must allow for calculated flexibility per the local settings.<\/p>\n Banking on Women<\/em> is an attempt to start bridging this rural China financial capability gap. The project borrows from international financial education program methodology, while also exploring new ideas in project design and implementation that better suit China\u2019s rural poor and Ningxia\u2019s market circumstances. For instance, the project takes advantage of WeChat, a widely used texting and social media platform in China, by posting stories and lessons that get sent to subscribers\u2019 phones. Voice messaging features have made the mobile application more accessible to partially illiterate rural women in China who are increasingly likely to own smartphones. The result is that a majority of rural women under the age of 50 in Ningxia (and in most other provinces) can now utilize WeChat to communicate and gain access to new sources of digital financial information for the first time.<\/p>\n Banking on Women<\/em> is an attempt to start bridging this rural China financial capability gap.<\/p><\/blockquote>\n Though the project explores new features, such as WeChat, it still fundamentally operates on the training-of-trainers (ToT) model of disseminating content. Positive Planet consultants train loan officers in key concepts as well as the skills required for training their clients. After receiving this training, loan officers are equipped with a set of simple financial capability tools, exercise instructions, and teaching cues so that they can more effectively engage their clients with content. During monthly, community-based loan repayment meetings, loan officers share the information and lessons with their clients.<\/p>\n Because the project aims to establish a sustainable approach to financial capability-building, loan officer-to-client trainings are designed to be compatible with regular work and are therefore kept brief, flexible, and conversational. By embedding educational content and client engagement directly into daily operations and providing many light touch points, key financial concepts can be reinforced in the long-term. Moreover, the MFI does not become over-encumbered with resource-intensive activities and programming that may not be realistically sustainable.<\/p>\n Of course, creating such a system remains a work in progress. The project has been an evolution of ideas and strategies, reflecting limitations and challenges of reaching remote clients through a rural organization. The case study \u201cBanking on Women: Financial Education in Rural China<\/a>\u201d sheds light on this development process. Topics covered in the case study include the following:<\/p>\n The paper can be viewed or downloaded in its entirety on the Positive Planet China website<\/a>. It is available in English and Chinese.<\/p>\n Since its entry into China in 2003, Positive Planet<\/a> has supported China\u2019s microfinance sector development by providing direct technical assistance to microfinance institutions. In recent years, Positive Planet has expanded its support beyond just technical advisory to MFIs, including direct assistance to MFI clients and other economically marginalized groups in areas like financial education. <\/em><\/p>\n Image credit: Positive Planet<\/em><\/p>\n Have you read?<\/strong><\/p>\n Insights into an Evolving Peer-to-Peer Lending Industry in China<\/a><\/p>\n New Surveys Fill Data Void in China\u2019s Microfinance Industry<\/a><\/p>\n Improving Access and Usage of Financial Products and Services in China<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" > Posted by\u00a0Tyler Aveni, Positive Planet Co-Country Director (China) Through the support of Diageo\u2019s Plan W initiative, Positive Planet\u2019s three-year women\u2019s empowerment project Banking on Women has provided financial education to more than 8,000 women across Huimin Dongfang Microcredit Company‘s client network in Ningxia Autonomous Region, China. The project\u2019s curriculum, which is based in the […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"regions":[25],"series":[],"types":[3123],"client":[],"topics":[52,54,3162,3213,3168],"personas":[],"institutional_partnerships":[],"clients":[],"program_teams":[3144,3154,3156,3383],"acf":{"authors":false,"types":{"term_id":3123,"name":"Blog Post","slug":"blog-post","term_group":0,"term_taxonomy_id":3123,"taxonomy":"types","description":"","parent":0,"count":2142,"filter":"raw","term_order":"0"},"header":{"header_type":"post_default","post_cover":{"description":""},"post_aligned":{"description":""},"post_default":{"description":"Rural Chinese women and their financial capability are the focus of a study in rural China"}},"meta_cta":{"download":false,"cta_button_text":"","cta_media":false,"cta_url":"","additional_links":false},"blocks":false,"page_settings":{"":null,"email_sign_up":true,"show_related_content":true,"show_contextual_menu":false,"contextual_menu_cta":null,"replace_global":false,"hide_sticky_share":false,"hide_date_when_featured":false,"is_list_view":false,"premium":false,"preview_image":false,"description":""},"related_content":{"cards":[{"ID":42139,"post_author":"75","post_date":"2021-04-01 11:21:10","post_date_gmt":"2021-04-01 15:21:10","post_content":"Headlines late last year breathlessly chronicled the whereabouts<\/a> of former Alibaba CEO Jack Ma and tensions between Ma and the Chinese government. The missing billionaire, the last-minute cancellation of a history-making IPO<\/a>, and the speech<\/a> that apparently started this tailspin of events captured the attention of the world. But beyond the headlines, this story is part of a larger signal that China is sending to big tech: put on your helmets, because we are getting off the sidelines.\r\n Like much of the developing world, mobile solutions present an affordable means to reach China\u2019s unbanked and underserved populations, who face obstacles to accessing quality financial services. Access to formal credit is difficult and limited; only 10 percent<\/a> of adults borrowed from a bank in 2014.\u00a0China\u2019s growing FinTech industry \u2013 with accompanying regulation to support qualified lenders \u2013 holds part of the answer to two of the most marginalized groups \u2013 rural households and migrant workers.<\/p>\r\n\r\n Age-proof channels and technology<\/em>. Financial institutions recognize that new technology, new channels, and new products must be built with the user experience in mind. There are existing vehicles for testing channels and technology to ensure that they work for older people. As part of vetting channels and technology, financial institutions can leverage older persons\u2019 associations, assuring the technology\u2019s validity for later life.<\/p>\r\n Ensure that staff members are not discriminating based on age.<\/em> Financial institutions and support organizations can test the customer experience through mystery shopping in order to better understand how people of different ages are treated when they walk into a branch. An exercise like this could inform market-specific training modules to dispel myths about aging for staff of financial institutions.<\/p>\r\n Use existing data to create better products.<\/em> Financial institutions have a wealth of data on clients that goes unused, and age is one data point that is collected because of the way that AML\/CFT laws are translated into institutional policy. Financial institutions can use the data they have on clients to better understand how age influences client behavior. From this data, financial institutions have the opportunity to create better products to serve people across their life cycle, and especially into their older age.<\/p>\r\nEnhance financial security in older age by leveraging G2P and P2G early on<\/em>. The shift toward electronic government-to-person and person-to-government payments presents an opportunity for creating \u201con-ramps\u201d to inclusion. Leveraging these products could include automatically diverting funds sent through electronic channels to help people save funds for older age (which is already happening in many parts of the world) or using electronic G2P payments that go to older people as collateral for loans (older people are often seen as higher risk). Financial institutions which provide the accounts through which electronic payments are channeled have the positioning to capitalize on this opportunity.\r\n\r\nRaise or eliminate age caps on credit and insurance<\/em>. Over half of the institutions we surveyed earlier this year<\/a> reported that they impose upper age restrictions on their products. Many age caps at microfinance institutions are based on outdated actuarial tables, and are ripe for being challenged or creatively eliminated. Many people who are older may be willing to pay more for credit. And financial institutions could find highly receptive clients if they responsibly raise age caps on credit products. A dedicated loan guarantee fund could help mitigate perceived risk during a pilot phase, accompanied with careful performance monitoring to provide more data about actual risks of lending to older adults.\r\n\r\nEnable people to save for their older age.<\/em> Pension systems were designed for a largely formal labor force, and the current reality of the size of informal markets does not match the intention of pensions systems. More progressive governments have begun to reform their pension systems to account for the more informal labor force, by creating alternative channels for contributions at places like corner stores and through mobile phones. Financial institutions can also play a role, either serving as channels to collect funds for the pension system or by setting up independent long-term savings programs that promise a competitive interest rate.\r\n\r\nWe are confident that there are a hundred more ideas that are just as good (or better). More importantly, though, we look forward to seeing a world in which age is not a barrier to people having access to a full range of quality financial services.\r\n\r\nIf you end up stealing one of these ideas, or if you\u2019re already doing something to advance industry thinking on aging, let us know\u2014we would love to champion your work.\r\n\r\nImage credit: World Bank<\/a><\/em>\r\n\r\nHave you read?<\/strong>\r\n\r\nMoving to Action on Aging and Financial Inclusion<\/a>\r\n\r\nAging and Financial Inclusion: An Opportunity<\/a>\r\n\r\nAging and Financial Inclusion: A Client Protection Issue?<\/a>\r\n\r\n \r\n\r\n \r\n\r\n \r\n\r\n ","post_title":"Aging and Financial Inclusion: Steal These Ideas!","post_excerpt":"","post_status":"publish","comment_status":"open","ping_status":"open","post_password":"","post_name":"aging-and-financial-inclusion-steal-these-ideas","to_ping":"","pinged":"","post_modified":"2018-09-12 19:22:55","post_modified_gmt":"2018-09-12 19:22:55","post_content_filtered":"","post_parent":0,"guid":"http:\/\/cfi-blog.org\/?p=20063","menu_order":0,"post_type":"post","post_mime_type":"","comment_count":"0","filter":"raw","featured_image":"https:\/\/cfi.accion-staging.flywheelsites.com\/wp-content\/uploads\/sites\/2\/2015\/11\/2652377697_7cd2f08d4e_o.jpg","acf":{"authors":[{"ID":26351,"post_author":"1","post_date":"2018-08-20 13:50:32","post_date_gmt":"2018-08-20 13:50:32","post_content":"","post_title":"Sonja Kelly","post_excerpt":"","post_status":"publish","comment_status":"closed","ping_status":"closed","post_password":"","post_name":"sonja-kelly","to_ping":"","pinged":"","post_modified":"2021-04-21 12:14:58","post_modified_gmt":"2021-04-21 16:14:58","post_content_filtered":"","post_parent":0,"guid":"http:\/\/cfi.accion.flywheelsites.com\/people\/sonja-e-kelly\/","menu_order":0,"post_type":"people","post_mime_type":"","comment_count":"0","filter":"raw"},{"ID":26325,"post_author":"1","post_date":"2018-08-20 13:50:31","post_date_gmt":"2018-08-20 13:50:31","post_content":"","post_title":"Susy Cheston","post_excerpt":"","post_status":"publish","comment_status":"closed","ping_status":"closed","post_password":"","post_name":"susy-cheston","to_ping":"","pinged":"","post_modified":"2018-08-30 18:25:14","post_modified_gmt":"2018-08-30 18:25:14","post_content_filtered":"","post_parent":0,"guid":"http:\/\/cfi.accion.flywheelsites.com\/people\/susy-cheston\/","menu_order":0,"post_type":"people","post_mime_type":"","comment_count":"0","filter":"raw"}],"types":{"term_id":3123,"name":"Blog Post","slug":"blog-post","term_group":0,"term_taxonomy_id":3123,"taxonomy":"types","description":"","parent":0,"count":2142,"filter":"raw","term_order":"0"},"header":{"header_type":"post_aligned","post_cover":{"description":""},"post_aligned":{"description":""},"post_default":{"description":""}},"meta_cta":{"download":false,"cta_button_text":"","cta_media":false,"cta_url":"","additional_links":false},"blocks":false,"page_settings":{"":null,"email_sign_up":true,"show_related_content":true,"show_contextual_menu":false,"contextual_menu_cta":null,"replace_global":false,"hide_sticky_share":false,"hide_date_when_featured":false,"is_list_view":false,"premium":false,"preview_image":false,"description":""}},"url":"aging-and-financial-inclusion-steal-these-ideas"}]}},"featured_image_url":false,"featured_image_caption":false,"parent_slug":false,"parent_name":false,"taxonomy_terms":{"post_format":{"name":"post_format","label":"Formats","labels":{"name":"Formats","singular_name":"Format","search_items":"Search Tags","popular_items":"Popular Tags","all_items":"Formats","parent_item":null,"parent_item_colon":null,"name_field_description":"The name is how it appears on your site.","slug_field_description":"The “slug” is the URL-friendly version of the name. 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China to big tech: put on your helmets, because we are getting off the sidelines.<\/blockquote>\r\nIn the last four months, China has published a slew of regulations (some still in draft form) aimed at big tech and their outsized role in the economy. This includes the draft Personal Information Protection Law<\/a> (PIPL), new rules including capital requirements and caps for online lenders, as well as draft anti-trust rules for digital platforms. And, dramatically, China called off Ant Group\u2019s globally anticipated IPO in November, in December launched an anti-trust probe into Ant\u2019s ecommerce parent Alibaba, and in February 2021 told Ant to restructure itself into a financial holding company.\r\n\r\nThe scale of big tech\u2019s reach into China\u2019s financial sector is worth reiterating. A billion Chinese consumers<\/a> use Alipay, owned by Ant, to pay for everything from groceries (even in the U.S.<\/a>) and utilities, to school tuition and traffic tickets. Alipay, and its competitor WeChat Pay (owned by TenCent), have deftly created business models that leverage increasing use of smartphones, allow for easy funding of digital wallets through linked bank accounts, and coax users into their digital ecosystem through low transaction fees and an ever-increasing array of services. Cross-selling through this ecosystem can be lucrative. For instance, Alibaba\u2019s product Yu\u2019E Bao rapidly became the largest money market fund in the world for a time.\r\n\r\nMore recently, Ant has received attention for facilitating hundreds of millions of online loans to consumers, many of whom could not qualify for bank-issued credit cards. Despite the mammoth amount of outstanding debt, Ant has taken on limited risk and acted as more of a facilitator than a lender. For instance, at the end of June 2020, Ant had approximately $267 billion in outstanding consumer debt, but just 2 percent of that amount was funded by Ant.\r\n\r\nWhose portfolios are on the hook? Ant has partnered with more than 100 commercial lenders and regional banks, collecting fees on interest income from them, and utilized colossal troves of transactional Alipay data to facilitate underwriting. This frenzy of unsecured lending has raised concerns around the concentration of risk that sits with lenders and not facilitating platforms.\r\n
Ant has utilized colossal troves of transactional Alipay data to facilitate underwriting.<\/blockquote>\r\n
New Rules of the Road<\/h2>\r\nNew regulation from China\u2019s Banking and Insurance Regulatory Commission clamps down on both sides of the online lending partnerships. For the lenders, regional banks are no longer permitted to lend outside their geographies, and there will be new caps on how much of a bank\u2019s capital and portfolio can be lent online. And for the platforms, starting in 2022, they will have to fund at least 30 percent<\/a> of every loan they make in concert with banks. These measures may take some needed steam out of the ballooning online lending market.\r\n\r\nDigital platforms are also the subject of new draft anti-monopoly rules<\/a> by the State Administration for Market Regulation, which targets practices such as the use of data and algorithms to offer different prices to different consumers, as well as self-dealing through elevating their in-house products compared to competitors who are selling on their platform. As they take comments on proposed revisions, antitrust authorities have increased the number of investigations and in recent months fined Alibaba, Tencent Holdings as well as smaller platforms like Pinduoduo and Meituan.\r\n\r\nThe PIPL, when approved, will be the country\u2019s first comprehensive data protection regime applicable to all data processors, including big tech. The draft PIPL contains some similarities to the European GDPR<\/a>, including provisions for the legal basis for processing data and enumerating data rights for consumers such as the right to rectify data mistakes. PIPL diverges from GDPR in terms of a larger focus on data localization, however.\r\n\r\nTaken in aggregate, the package of emerging regulations demonstrates resolve among Chinese authorities to get tougher in the face of the enormous market power of big tech, which during the pandemic only embedded itself further into daily life.\r\n\r\nHowever, beyond the heavyweight bouts between big tech and political authorities and implications for the companies, it is important to monitor how consumers are impacted by the new rules. Hopefully, consumers will benefit from more responsible online lending practices, fewer scams and predatory pricing, and more communication around the use of their data. As one Chinese internet regulator stated, consumers should not be \u201cprisoners to algorithms<\/a>.\u201d We\u2019ll be closely watching the market to understand how fintechs and consumers are responding and to understand what lessons other markets might draw from the Chinese approach to checking the power of big tech.\r\n\r\nIn the meantime,\u00a0 read our recent publication, The Stories Algorithms Tell: Bias and Financial Inclusion at the Data Margins<\/em><\/a>, about how FSPs are using algorithmic data to make credit decisions, how those affect low-income consumers globally, and what regulators can and should do.","post_title":"Regulatory Headwinds on the Horizon for Chinese Fintechs: Where Do Consumers Fit In?","post_excerpt":"","post_status":"publish","comment_status":"open","ping_status":"open","post_password":"","post_name":"regulatory-headwinds-on-the-horizon-for-chinese-fintechs-where-do-consumers-fit-in","to_ping":"","pinged":"","post_modified":"2021-04-01 13:40:03","post_modified_gmt":"2021-04-01 17:40:03","post_content_filtered":"","post_parent":0,"guid":"https:\/\/content.centerforfinancialinclusion.org\/?p=42139","menu_order":0,"post_type":"post","post_mime_type":"","comment_count":"0","filter":"raw","featured_image":"https:\/\/cfi.accion-staging.flywheelsites.com\/wp-content\/uploads\/sites\/2\/2021\/04\/Shanghai-china-night-street-people-walking-neon-signs.jpg","acf":{"types":{"term_id":3123,"name":"Blog Post","slug":"blog-post","term_group":0,"term_taxonomy_id":3123,"taxonomy":"types","description":"","parent":0,"count":2142,"filter":"raw","term_order":"0"},"header":{"header_type":"post_aligned","post_cover":{"description":""},"post_aligned":{"description":""},"post_default":{"description":""}},"authors":[{"ID":26330,"post_author":"1","post_date":"2018-08-20 13:50:31","post_date_gmt":"2018-08-20 13:50:31","post_content":"","post_title":"Alexandra (Alex) Rizzi","post_excerpt":"","post_status":"publish","comment_status":"closed","ping_status":"closed","post_password":"","post_name":"alexandra-alex-rizzi","to_ping":"","pinged":"","post_modified":"2021-03-02 17:16:39","post_modified_gmt":"2021-03-02 21:16:39","post_content_filtered":"","post_parent":0,"guid":"http:\/\/cfi.accion.flywheelsites.com\/people\/alexandra-rizzi\/","menu_order":0,"post_type":"people","post_mime_type":"","comment_count":"0","filter":"raw"}],"meta_cta":{"download":false,"cta_button_text":"","cta_media":false,"cta_url":"","additional_links":false},"blocks":false,"page_settings":{"":null,"email_sign_up":true,"show_related_content":true,"show_contextual_menu":false,"contextual_menu_cta":null,"replace_global":false,"hide_sticky_share":false,"hide_date_when_featured":false,"is_list_view":false,"premium":false,"preview_image":false,"description":""}},"url":"regulatory-headwinds-on-the-horizon-for-chinese-fintechs-where-do-consumers-fit-in"},{"ID":22655,"post_author":"4","post_date":"2017-01-05 17:45:43","post_date_gmt":"2017-01-05 21:45:43","post_content":"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.\r\n\r\nChina\u2019s government is piloting a new \u2018social credit\u2019 scoring system that takes into account a diversity of financial and nonfinancial factors and behaviors. The financial ones are familiar \u2013 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\u2019s family planning rules, criticizing the ruling party<\/a>, and neglecting your elderly parents.\r\n\r\nThe social credit system may be used to affect financial opportunities, like securing loans, as well as non-financial ones, like job offers, your child\u2019s admission to schools, faster treatment at government offices, access to luxury hotels, and being able to buy transit tickets.\r\n\r\nAs one would suspect from its name and design, the system has aims far beyond extending financial services. (Only 320 million<\/a> of China\u2019s 1,400 million citizens have a traditional credit score.) The system aims to assess citizens\u2019 overall trustworthiness. According to planning documents<\/a>, the initiative\u2019s objective is \u201cto allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step.\u201d A high-level policy document released in September writes<\/a>: \u201cIf trust is broken in one place, restrictions are imposed everywhere.\u201d Indeed, in October President Xi Jinping called for<\/a> innovation in \u201csocial governance\u201d that would \u201cheighten the capacity to forecast and prevent all manner of risks.\u201d Reportedly<\/a>, those who are well-behaved will gain privileged access, while those who break social trust will not only be subject to restrictions, they\u2019ll face expanded supervision and random inspections.\r\n\r\nThe social credit system is being piloting across a handful of cities across the country and is slated for a nationwide roll-out by 2020. The system is driven by the State Council (which is the Government\u2019s cabinet) and the Central National Planning Agency.\r\n\r\nThe new social credit system would tie into the country\u2019s existing blacklisting system, which is part of its judiciary system and affects citizens\u2019 abilities to partake in certain services. In a comprehensive investigation<\/a> of the new social credit system, The Wall Street Journal<\/em> shares an anecdote of how under the existing blacklist system, a travel company executive can\u2019t buy tickets for planes or high-speed trains because a Hangzhou court put him on a blacklist after he lost a dispute with a landlord. The social credit system\u2019s blueprints, released by the Government in 2014, indicate that the blacklisting mechanism will expose offenders, enforce restrictions, and embolden well-behaved citizens.\r\n\r\nIn the neighborhood of Yangjing, as part of the social credit system pilot, a \u201cred list\u201d of exemplary residents is already being published. However, it hasn\u2019t yet been decided if the corresponding \u201cgray list\u201d of residents who have behaved badly will be publicized. Yangjing has roughly 170,000 residents but only 120 have made the red list. Limited data sharing has been cited as limiting the system\u2019s ability to rate residents.\r\n\r\nThe social credit system will extend beyond citizens to rating companies too, in an attempt to hold organizations accountable for malfeasances like paying bribes, polluting, or health infractions.\r\n\r\nMore than three-dozen local governments across China are participating in this pilot phase, compiling digital records of social and financial behaviors. The system incorporates data produced by central government departments and local governments, such as court records, and loan and tax data. It is not clear whether governments are tapping private sector data. The 2014 system blueprint designates internet data as a \u201cstrategic national resource\u201d but it remains to be seen whether private and public systems will be combined. As it stands, e-commerce companies like Alibaba are only obligated to provide the government with non-anonymous data revealing individuals\u2019 identities in special cases like lawsuits.\r\n\r\nHowever, the government has greenlighted<\/a> eight companies to experiment via their own social credit scores pilots. For example, e-commerce giant Alibaba has droves of data pertaining to the everyday habits of its users. Alibaba\u2019s Ant Financial and Sesame Credit are assigning users ratings based on behavior and partnering with other entities to offer perks. A good rating<\/a>, which might come from behaviors like buying \u201cproductive\u201d goods like diapers as compared to videogames, can enable express security screening at the Beijing airport, renting cars without deposits<\/a>, or a prominent listing on the Baihe matchmaking site.\r\n\r\nIn its current form, China\u2019s social credit system is dangerously suspect: it can be interpreted as a veiled attempt from the regime to dictate morality and more closely track and control a populace that already lacks basic rights like freedom of speech, particularly given that political activity is one of the elements observed and recorded in the score.\r\n\r\nIt is not surprising that a country with a strong tradition of heavy social control would devise a system that monitors and leverages so many aspects of a person\u2019s behavior. But is it equally farfetched to think that elements of a social score could find their way into countries that prize and attempt to protect individual freedom? Consider the possible slippery slope. Today, use of data from multiple facets of a person\u2019s life are used to tailor advertising and are increasingly incorporated into credit scoring algorithms. It is not inconceivable that such data could eventually be used to determine access to health insurance, preferential treatment by many industries, targeting by political parties, and ultimately, by government agencies.\r\n\r\nInstilling incentives to improve citizens\u2019 and organizations\u2019 behaviors sounds like a socially positive aim. Who wouldn\u2019t want our countries to be safer or our fellow citizens to pay their fair share? But contemporary systems whose punishments are siloed within their respective systems \u2013 e.g. traffic violations resulting in fines or revoking ones drivers license \u2013 are undoubtedly more appropriate.\r\n\r\nHave you read?<\/strong>\r\n\r\nInsights into an Evolving Peer-to-Peer Lending Industry in China<\/a>\r\n\r\nFinancial Education in China: Challenges and Lessons in an Embedded Education Model<\/a>\r\n\r\nImproving Access and Usage of Financial Products and Services in China<\/a>\r\n\r\n ","post_title":"The News from China: Can a Speeding Ticket Hurt Your Credit Score?","post_excerpt":"","post_status":"publish","comment_status":"open","ping_status":"open","post_password":"","post_name":"the-news-from-china-can-a-speeding-ticket-hurt-your-credit-score","to_ping":"","pinged":"","post_modified":"2018-09-19 14:16:33","post_modified_gmt":"2018-09-19 14:16:33","post_content_filtered":"","post_parent":0,"guid":"http:\/\/cfi-blog.org\/?p=22655","menu_order":0,"post_type":"post","post_mime_type":"","comment_count":"1","filter":"raw","featured_image":false,"acf":{"types":{"term_id":3123,"name":"Blog Post","slug":"blog-post","term_group":0,"term_taxonomy_id":3123,"taxonomy":"types","description":"","parent":0,"count":2142,"filter":"raw","term_order":"0"},"authors":[{"ID":26353,"post_author":"1","post_date":"2018-08-20 13:50:32","post_date_gmt":"2018-08-20 13:50:32","post_content":"","post_title":"Jeffrey Riecke","post_excerpt":"","post_status":"draft","comment_status":"closed","ping_status":"closed","post_password":"","post_name":"jeffrey-riecke","to_ping":"","pinged":"","post_modified":"2021-06-29 16:04:35","post_modified_gmt":"2021-06-29 20:04:35","post_content_filtered":"","post_parent":0,"guid":"http:\/\/cfi.accion.flywheelsites.com\/people\/jeffrey-riecke\/","menu_order":0,"post_type":"people","post_mime_type":"","comment_count":"0","filter":"raw"}],"header":{"header_type":"post_default","post_cover":{"description":""},"post_aligned":{"description":""},"post_default":{"description":""}},"meta_cta":{"download":false,"cta_button_text":"","cta_media":false,"cta_url":"","additional_links":false},"page_settings":{"":null,"email_sign_up":true,"show_related_content":true,"show_contextual_menu":false,"contextual_menu_cta":null,"replace_global":false,"hide_sticky_share":false,"hide_date_when_featured":false,"is_list_view":false,"premium":false,"preview_image":false,"description":""},"blocks":false},"url":"the-news-from-china-can-a-speeding-ticket-hurt-your-credit-score"},{"ID":21411,"post_author":"4","post_date":"2016-06-06 06:00:56","post_date_gmt":"2016-06-06 10:00:56","post_content":"> Posted by\u00a0Tim Tsang, Positive Planet China<\/em>\r\n
A need for formal credit in China<\/h3>\r\n<\/a>\r\n\r\nBetween 2011 and 2014, 180 million adults<\/a> (aged 15+) became new bank account holders in China.\u00a0Yet in 2014, only 9.6 percent<\/a> 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.\u00a0The incongruity across such statistics highlights both the progress made and the challenges remaining on China's path to a more financially inclusive economy.\r\n\r\nThe 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<\/a> 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<\/a> of Chinese adults borrowing in 2014.\r\n\r\nAmong China\u2019s informal lenders, family or friends are still the most common for financing individual loans, but \u201cshadow banking\u201d 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.\r\n\r\nThe reliance on informal and nontraditional sources of lending in part reflects<\/a> more young, high-risk consumers looking for credit, but it also is a symptom of a lack of available information. Lenders often have no access to the borrower's financial history much less their reasoning for borrowing money.\r\n
Solving the credit gap through online data<\/strong><\/h3>\r\nClosing China's formal credit gap requires a scalable system for credit evaluation. China's current solution of the Credit Reference Agency, a centralized credit agency, falls short. While it has profiles of over 800 million individuals, many are reportedly filled with no more than basic information such as names and ID numbers. In fact, only 350 million<\/a> \u2013 less than one third of the over 1 billion Chinese adults \u2013 have credit records. By comparison, 89 percent<\/a> of the adult population in the U.S. has a credit score.\r\n\r\nAs the flag-bearer for China's internet finance and mobile payment movement via its Alipay service, Alibaba-affiliate Ant Financial<\/a> is trying to provide an innovative solution. By leveraging its IT expertise, Ant Financial is trying to do to credit scoring what it has done to payments. Its solution: Sesame Credit.\r\n\r\nNew credit scoring<\/a> businesses have been cropping up around the world recently. What sets this new credit score apart is the scale and depth of Alibaba\u2019s<\/a> e-commerce data to which Ant Finance has direct access. The big data gathered from these e-commerce and payment platforms are far more insightful for credit-based decision-making than what most other nontraditional businesses are claiming to achieve with social media or other forms of non-economic, online activity.\r\n\r\nTapping into the Alibaba ecosystem gives Sesame Credit access to data on over 400 million<\/a> annual active\u00a0users and 37 million<\/a> small businesses\u00a0that buy and sell via its online marketplaces, as well as payment histories of over 400 million<\/a> annual active Alipay users.\u00a0This expertise in cloud and data management is then coupled with other traditional credit scoring information sources such as bank and government records. That Ant Financial can further utilize data from Alibaba\u2019s many other businesses, capitalize on the group\u2019s expansive human and IT resources, and leverage its China gravitas to win important, strategic partnerships means it has real potential in bolstering China's future credit infrastructure.\r\n
Is it a tool for the underserved?<\/strong><\/h3>\r\nSesame Credit has shown early promise in its ability to expand access to credit. Ant Financial has already been providing loans to businesses showing strong sales performance on its platforms, and \u201cSesame scores\u201d are clearly an attempt to standardize and expand on this model.\r\n\r\n[caption id=\"attachment_21417\" align=\"alignright\" width=\"331\"]<\/a> (click to enlarge)[\/caption]\r\n\r\nOf course, a good Sesame Credit score is contingent on adequate use of one or more of its data-generating services, most of which fundamentally require ownership of a smartphone or computer.\u00a0 Rural residents are thus at an inherent disadvantage when it comes to Sesame Credit, as just one third of the countryside are online and only 32 percent<\/a> own a mobile phone, according to KPMG.\r\n\r\nNevertheless, Ant Financial has shown its intent to build a rural user base by investing in the countryside's data-generation. Its investment into the Postal Savings Bank of China<\/a> (PSBC), which has the largest network of branches in China, will provide<\/a> the credit reporting with vital financial information on rural users.\r\n\r\nFurther, an expansion of its businesses to rural areas should only equate to more data-crunching possibilities to better serve this population. Alibaba, still the key party behind Sesame Credit\u2019s data network, has heavily invested in rural infrastructure to expand its market potential to increasingly rural and remote locations. For instance, it has built rural service centers in over 14,000 villages<\/a>\u00a0and has even developed a rural-focused online shopping platform, \"Rural Taobao.\" These service centers help deliver products within villages and are outfitted with computers, providing greater access to the internet. To meet the logistics burden of reaching rural residents, Alibaba\u2019s related business arm formed a strategic alliance with China Post, allowing online shoppers to collect packages from 5,000 postal outlets<\/a>.\u00a0Within the next three to five years, Alibaba hopes constructing more such centers will expand its services to over 100,000 villages<\/a>.\u00a0After developing a history using these services, rural residents may then gain newfound opportunities to borrow and invest as the integrated businesses funnel customers to Ant Financial.\r\n
Too soon<\/strong> to tell<\/strong><\/h3>\r\nThe sum of Ant Financial and Alibaba\u2019s advantages may soon make it one of the most powerful success stories in global financial inclusion efforts. But chances are it will never be a magic bullet \u2013 it is unlikely that everyone can be plugged into Alibaba\u2019s businesses. At this point, it remains hard to imagine what Sesame Credit will ultimately become. Sesame Credit has already innovated into non-financial uses that are simultaneously novel and concerning: a visa processing tool, a matchmaking moniker, and flight and hotel booking perks, among many others. This gives Sesame Credit the look and feel of a gimmicky loyalty program for Alibaba customers. Further, little information in the public realm can firmly prove that Sesame Credit scores are actually providing much insight into credit worthiness beyond what Ant Financial had already directly provided in terms of discerning credit worthiness of e-commerce businesses.\r\n\r\nAdding to the complexity of the topic, there is also much fear and speculation that the government will fashion Alibaba\u2019s work on scoring into a surveillance scheme. Plans for a more centralized credit scoring system are already in the works, and some signs point to Alibaba having no choice but to assist in this process. What is clear now, however, is that Sesame Credit must first prove itself effective and reliable before any of the extenuating circumstances become too relevant. The potential for positive change is there. Now Ant Financial must try to realize it.\r\n\r\nThis post was jointly-published with NextBillion<\/a>.<\/em>\r\n\r\nHave you read?<\/strong>\r\n\r\nInsights into an Evolving Peer-to-Peer Lending Industry in China<\/a>\r\n\r\nWhy We Aren\u2019t Surprised that Ezubo, the P2P Lender in China Is a Ponzi Scheme<\/a>\r\n\r\nNew Surveys Fill Data Void in China\u2019s Microfinance Industry<\/a>\r\n\r\n<\/a>\r\n\r\n<\/a>\r\n\r\n ","post_title":"How New Credit Scores Might Help Bridge China\u2019s Credit Gap","post_excerpt":"","post_status":"publish","comment_status":"open","ping_status":"open","post_password":"","post_name":"how-new-credit-scores-might-help-bridge-chinas-credit-gap","to_ping":"","pinged":"","post_modified":"2018-09-19 21:17:00","post_modified_gmt":"2018-09-19 21:17:00","post_content_filtered":"","post_parent":0,"guid":"http:\/\/cfi-blog.org\/?p=21411","menu_order":0,"post_type":"post","post_mime_type":"","comment_count":"0","filter":"raw","featured_image":false,"acf":{"types":{"term_id":3123,"name":"Blog Post","slug":"blog-post","term_group":0,"term_taxonomy_id":3123,"taxonomy":"types","description":"","parent":0,"count":2142,"filter":"raw","term_order":"0"},"authors":false,"header":{"header_type":"post_default","post_cover":{"description":""},"post_aligned":{"description":""},"post_default":{"description":""}},"meta_cta":{"download":false,"cta_button_text":"","cta_media":false,"cta_url":"","additional_links":false},"page_settings":{"":null,"email_sign_up":true,"show_related_content":true,"show_contextual_menu":false,"contextual_menu_cta":null,"replace_global":false,"hide_sticky_share":false,"hide_date_when_featured":false,"is_list_view":false,"premium":false,"preview_image":false,"description":""},"blocks":false},"url":"how-new-credit-scores-might-help-bridge-chinas-credit-gap"},{"ID":21052,"post_author":"4","post_date":"2016-04-05 14:00:35","post_date_gmt":"2016-04-05 18:00:35","post_content":"MetLife Foundation<\/a><\/a>\u2019s goal is to improve financial inclusion across its footprint, which includes economically and geographically diverse markets. Ensuring that low- and moderate-income families in these markets can acquire and successfully use the products and services they need to build a better, more secure life is complex and therefore requires innovative solutions that reach different consumers in different ways.\r\n\r\nIn China, our newest approach to improving the financial health of everyday consumers is through harnessing the power of social entrepreneurs.<\/strong>\u00a0As part of a broader global push to strengthen ventures and organizations working in the area of financial inclusion, we\u2019ve teamed up with Verb<\/a> to run a series of competitions, called Inclusion Plus<\/a>. Beginning on May 19, 2016 we will invite social enterprises (nonprofit and for-profit alike) throughout China that are focused on increasing access and use of financial services among low- to moderate-income people to enter their products, services, or programs for the chance to win grant capital and mentoring from MetLife advisors.\r\n\r\nOpening a competition in China meant we needed to better understand the local financial inclusion landscape. We know that the rapid economic growth in China over the past 20 years has been the envy of the world. More surprisingly, however, is that between 2011 and 2014 China made significant strides toward financial inclusion adding around 180 million adult account holders<\/a>, bringing the number of adult account holders to 79\u00a0percent\u00a0of the population.\u00a0According to the 2014 Global Findex, these account holders include marginalized groups such as women and poorer rural households, though the bulk of China\u2019s unbanked population resides in rural areas, and over half of whom are women. As such, the Foundation\u2019s focus for the Inclusion Plus competition is on ensuring the unbanked or underserved populations, such as low-wage workers, smallholder farmers, small business owners, and migrant workers have access to affordable and convenient financial services and products which focus on day-to-day financial well-being.\r\n\r\nIn addition to China\u2019s economic growth story, its rapid decline of poverty is worth noting. Since the 1980s, China\u2019s poverty rate has fallen from 52 percent to around 11 percent<\/a> as of 2010.\u00a0This incredible progress comes with the implementation of promising policies<\/a> for financial inclusion such as banking reforms, policy shifts that give way to new types of financial institutions, and a focus on uptake of bank accounts.\u00a0New technology-driven solutions have also begun to emerge. These changes contribute to the fact that nearly eight in ten Chinese have a bank account, according to the 2014 Global Findex.\r\n\r\nTo<\/strong> continue moving the needle on financial inclusion, there are three inter-related opportunities for impact in the near term. <\/strong>\r\n
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