Is the Development of China’s Financial Inclusion Sustainable? Evidence from a Perspective of Balance

Bao Zhu,Shiting Zhai,Jing He

doi:10.3390/su10041200

Bao Zhu, Shiting Zhai + Show 1 more

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https://doi.org/10.3390/su10041200

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Abstract

Balance plays an important role in the sustainable development of China’s financial inclusion. First, this paper reports the entropy weight method used to construct a financial inclusion index (FII) and measure the level of development of financial inclusion in China’s regions. Second, the concept of the Gini coefficient of financial inclusion is proposed and the structural balance of China’s financial inclusion is shown, as calculated by using this Gini coefficient. Third, we report the use of a dynamic shift-share model to further discuss the development balance of the financial inclusion of China’s regions. The results show that there is an imbalance in the development of financial inclusion in China’s regions. For 2006–2016, the Gini coefficient and the structural balance of China’s financial inclusion show a significant downward trend. The gap of the financial inclusion development between regions is narrowing and the structure of China’s financial inclusion tends to be reasonable. The penetration dimension is at a structural disadvantage. Availability and usage dimension are at a structural advantage, which can effectively promote the development of China’s financial inclusion. In the future, the government should establish a more balanced financial inclusion development mechanism, making full use of structural advantages of the availability and usage of financial services to promote the sustainable development of China’s financial inclusion.

Highlights

Financial inclusion originates from microcredit and microfinance, which emerges in the context of global financial exclusion
Looking at the structural components of the three regions, we find that the mean values of the structural components of the penetration dimensions in the three regions are negative
The growth rate of the penetration dimension is lower than the overall growth rate of China’s financial inclusion index (FII), which has not played a positive role in promoting the development of financial inclusion

Summary

Introduction

Financial inclusion originates from microcredit and microfinance, which emerges in the context of global financial exclusion. As an important part of China’s financial reform, financial inclusion plays a crucial role in promoting economic development. According to the latest Global Findex database released by The World Bank, the penetration rate of China’s formal financial account in 2014 was 78.9%, which has a significant gap from the level of 94% in developed countries. In terms of credit availability, the proportion of people in China who can obtain loans from formal financial institutions is 9.5%, which is only about half the level of it in developed countries. Since China’s economic reform and opening up, the unbalanced development strategy was adopted, which helped China to achieve relatively fast economic growth and resulted in obvious regional economic and financial disparity. This paper describes the sustainable development of China’s financial inclusion from the perspective of balance and provides some policy suggestions for the government

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