The Impact Of China's Small And Medium-sized Financial Institutions' Development On Financial Inclusion

The scale increase of financial system does not necessarily bring the coverage expansion of financial system.Increase of the total amount of financial resources only can not guarantee the fair distribution of financial resources.The unbalanced distribution of financial resources in different regions and among different social groups in China has seriously restricted the role of finance in terms of promoting the real economy.Against such backdrop,pushing forward financial inclusion,namely,establishing a financial system that can effectively provide overall financial service to all social walks and groups,has become an important direction of deepening financial system reform in China.In the process of China's financial sector reform,the small and medium-sized financial institutions,as the priority of the reform,have played an important role in promoting industry competition and forming multi-level financial system.However,while optimizing the structure of financial sector,has the development of small and medium-sized financial institutions promoted the development of financial inclusion?Since the main task of financial inclusion is to provide access to financial service for small and micro enterprises and low-income groups,which are excluded from the service of traditional financial institutions,then,compared with large financial institutions,small and medium-sized financial institutions are more suitable for this task.On the one hand,with a distinct “grass-root” feature,small and medium-sized financial institutions mainly provide service to small and medium-sized enterprise and other customers that are rejected by large financial institutions.By doing so,supply and coverage of financial service can be increased.On the other hand,born out of local community,medium and small financial institutions are closely integrated with local communities.They can make full use of geographical and personnel advantages to effectively address the information asymmetry between financial institutions and enterprises,lower the costs of financial service,at the same time,better serve the needs in terms of organization structuring and stuffing to improve the quality of financial service.Based on the above reasons,the thesis takes China's small and medium-sized financial institutions as objects for investigation and conducts an in-depth research on the important influence of their development on financial inclusion.Firstly,based on“Small Bank Advantage” theories and banking market structure hypothesis,the thesis analyzes the transmission channels and impact mechanism of small and medium-sizedfinancial institutions on financial inclusion.Secondly,the thesis uses the latest data of World Bank's Global Findex Database to analyze the status of China's financial inclusion development and compares it with that of other countries.By doing so,it is expected to find out gaps between China and developed countries.Thirdly,the thesis does empirical studies of the impact of the development of small and medium-sized financial institutions on financial inclusion from macro and micro aspects respectively.At the macro level,the thesis studies the impact of market share changes of small and medium-sized financial institutions on the regional financial inclusion index in China,by analyzing a panel data of 31 provinces during 2006-2011 with differential regional economic development.The results indicate that increasing market share of small and medium banks has a positive effect on financial inclusion.This effect,however,is weaker in the developed regions.In the context of dual economic structure,a reform implemented by new measures as well remains all the old policies cannot hit the aim.To narrow the financial inclusion gap between regions,it is necessary to increase competition in the under developed regions and promote the development of small and medium-sized banks.At the micro level of enterprises,using 2179 samples of private enterprises in the China Enterprise Survey by the World Bank in the year 2012,the thesis empirically analyzes the impact of China's small and medium sized financial institutions' development on the financing constraints of SMEs,with the ordered probit model.The results show that:(1)the diversification of the banking market structure can effectively relieve the financing constraints of SMEs;(2)compared with the state-owned commercial banks,the small and medium-sized banks play a more important role in relieving the financing constraints of SMEs;(3)different types of small and medium –sized banks have different effects on relieving the financing constraints of SMEs.In general,compared with joint-equity commercial banks,city commercial banks play a greater role in relieving the financing constraints for SMEs and are more inclined to provide financial service for the small and micro enterprises,while joint-equity banks play a greater role in relieving financing constraints for medium-sized enterprises.At the micro level of households,using 8430 samples in 2011 Chinese Household Finance Survey(CHFS),the thesis conducts an empirical study on the extent of concentration of formal financial services among different income levelhouseholds measured by the concentration index and role of small and medium –sized banks in promoting financial inclusion with the ordered probit model.The results show that:(1)the distribution of formal financial services among different income level households is unequal,and the financial inclusion is concentrated among richer households;(2)although the development of small and medium-sized financial institutions promote financial inclusion among households across all income groups,different types of small and medium-sized financial institutions have different effect on different income groups;(3)Joint-equity commercial banks and city commercial banks play a greater role in fostering financial inclusion for medium and low income households,while rural small and medium-sized financial institutions have no significant influence on all income groups.Finally,based on the results of empirical research,from government and financial institutions aspects respectively,the thesis puts forward specific suggestions on how to establish an inclusive financial system,and on how to improve the inclusive financial service of institutions.The thesis is the first study combining the financial inclusion theory with the development of China's small and medium-sized financial institutions,and researching the effects of the development of China's small and medium-sized financial institutions and their induced market structure adjustment on the inclusive development of the financial system.Compared with existing literature,the empirical design of this thesis is more detailed and thorough to distinguish differentiated effect of small and medium-sized financial institutions on financial inclusion in different economic development levels,different enterprise scales and different income levels.Moreover,this thesis has a certain degree of innovation in some key indicators design and measurement,such as the regional financial inclusion index,corporate financing constraint index and the concentration index.Based on these empirical results,the thesis can evaluate the role played by small and medium-sized financial institutions in promoting financial inclusion and the performance achieved by China's financial industry “incremental reform” more objectively.