Research On The Impact Of Inclusive Finance And Financial Technology On Bank Performanc

The "14th Five-Year" Plan pointed out that the economic and social development during the new development stage should realize more vitality of market players,focus on the development of the real economy,unswervingly build the powerful network country and digital China,and improve the quality and benefit of economy.As the most important part of China’s financial system,banks are inseparable from the activity of SMEs and the high-quality development of economy.Since the introduction of the "Inclusive Finance Promotion Development Plan(2016-2020)" at the end of 2015,the banking industry has continued to increase the supply of credit in key areas of Inclusive Finance,and the availability of various services has further improved.In the process of financial services to the real economy,banks use Fin Tech(Financial Technology)to develop Digital Inclusive Finance,take Digital Banking as the transformation direction,and continuously apply Big Data etc.technologies to achieve a balanced development situation of Inclusive Finance as "volume increased,scale expanded,price reduced,and risk controlled",thus optimize the allocation of financial resources among market entities.As of the end of 2020,the balance of inclusive small and micro loans exceeded 15 trillion Yuan while the NPR was close to3%,and the average interest rate for the year was 5.88%.In that way,for the banking industry itself,whether the increasing volume of Inclusive Loans and falling loan interest rates will affect risks and performance is a question worth pondering.This paper provides empirical evidence of the implementation effect of Inclusive Finance Plan,deepens the understanding of financial inclusion and the economic connotation of Fin Tech from a new microscopic perspective,and enriches the evaluation methods for banks on the balance between risk and return,quality and efficiency.Thus,it has theoretical guiding significance.The analysis path and research conclusions of the combination of Inclusive Loans and Fin Tech are conducive to plan makers and bank executives to optimize and improve the Inclusive Finance strategy and further promote the use of Fin Tech.It provides a useful reference for improving the quality and efficiency of financial services to the real economy with Digital Inclusive Finance,and carrying forward financial supply side structural reforms.This paper uses the 2016-2019 monthly operating data of each branch of a national joint-stock bank in China as research sample.Three main research contents are proposed based on the existing literature.The first part focuses on the impact of Inclusive Loans on bank risks and business performance,mainly answering whether Inclusive Loans have an impact on bank risk-taking,whether differences of customer types,locations,and asset scales have heterogeneity,and what is the corresponding effect mechanism.The second part focuses on the impact of the bank’s Fin Tech level,including the bank’s internal application of Fin Tech and the external development environment of Fin Tech.This part also examines the heterogeneity of financial geography in the impact of Inclusive Loans and Fin Tech on banks based on the distance between the branch and the head office.The third part measures the Total Factor Productivity(TFP)of each branch,discusses the impact of Inclusive Loans and Fin Tech on bank efficiency from both business and technical perspectives,and also tests the Return on Assets(ROA)as the bank’s operating efficiency indicator.The study found that:(1)The increase in Inclusive Loans will lower the overall asset quality of banks and increase non-performing assets;different customer entities and different regions have risk heterogeneity,i.e.,the risk of Inclusive Loans for SMEs is higher than that of personal Inclusive Loans,eastern regional inclusive loans are less risky.In terms of the impact on performance,banks have a phenomenon of "balance increase without profit increase,or even with no profit" when issuing Inclusive Loans due to cost-benefit asymmetry."Doing business at a loss" has a negative impact on operating income.Inclusive Loans under pressure will gradually expose risks as the maturity date approaches,squeezing bank profits.(2)Fintech has increased the willingness of banks to issue Inclusive Loans;the bank’s internal Fin Tech level and the external Fin Tech development environment in which the bank is located can reduce the risk of Inclusive Loans and improve bank performance.In terms of financial geographic heterogeneity,Fin Tech can effectively adjust the risk impact of Inclusive Loans and has a more positive effect on improving business performance for long-distance branches.(3)Inclusive Loans have a negative effect on banks’ TFP,which is mainly brought from SMEs;Fin Tech has a positive effect on banks’ TFP,which is mainly resulted by reducing banks’ information costs,operating costs,and transaction costs effectively,and improving profitability and ROA.The innovation of this paper is to put Inclusive Loans,Fin Tech,bank risk,performance and efficiency under one analysis framework,and then discuss the influence path of Inclusive Loans on bank risk and operation management and the transmission path of Fin Tech on bank efficiency from a micro perspective.The research content not only examines the overall impact of Inclusive Loans,but also explores the impact of customer heterogeneity,which is more targeted to properly solve the financing difficulties of inclusive small and micro entities.In addition,financial geographic heterogeneity analysis from the perspective of economic geography provides a new theoretical explanation for the financial structure theory.Based on the research findings,this paper makes the following recommendations:Firstly,the government should draft and release the "Inclusive Finance Promotion Development Plan(2021-2025)" as soon as possible on the basis of a comprehensive assessment of the first five-year development plan of Inclusive Finance;Regulatory authorities should adopt differentiated assessment policies based on different regions and types of banks to reduce banks’ irrational behavior of impulse and excessive business development.Secondly,banks should combine their own advantages and capabilities to subdivide markets and customer groups,reduce costs through internal Funds Transfer Pricing(FTP)preferential policies,SMEs franchise operating mechanisms,and improve business efficiency and profitability by online and offline synergies.Thirdly,the industry should makes use of the positive externalities of Fin Tech to enhance financial inclusion,embeds digital technology and financial scenarios in financial services,strengthens the synergy between business and technology;and develop Digital Finance which is represented by Digital Financial Inclusion and gradually realize the "digital intelligence" of Inclusive Finance,aming at improving customer stickiness and the operating efficiency of banks.