FinVolution study highlights digital technology in bridging financing gap for SMEs

FinVolution, a leading fintech company, today released a study on technology's role in empowering small and micro enterprises (SMEs).

The study, entitled "Research Report on Technology Assisting the Breakthrough of Small and Micro Enterprises' Growth: Small and Micro Financing Development and Outlook in 2022," was issued in partnership with China Association of Small and Medium Enterprises (CASME) and iResearch Consulting Group.

The report highlights that in 2021, Chinese SMEs' loan demand reached 10.43 trillion RMB, with a satisfaction rate of 48.5%. Despite a marked improvement from the level in late 2017, which stood at 41.6%, a 5.37-trillion RMB shortfall remains.

As the study finds, SMEs face financing insufficiency and structural imbalances. Digital technology is crucial for addressing these challenges. Online microcredit, driven by technology and a wealth of data, is emerging as a trendy solution for serving these long-tail customers.

In his speech, Xianzhu Nie, Deputy Secretary-General of CASME, emphasized the huge gap between financial supply and demand, especially for SMEs, individual businesses, self-employed individuals and entrepreneurs. Existing financial service models struggle to meet their early-stage, diverse, short-lived and small-scale financing needs.

With the rapid development of fintech, the digital mode of inclusive finance has provided a feasible path to address the financing difficulties of SMEs, especially challenges in credit financing.

Shiyi Wang, Vice President of FinVolution, noted the long-standing financing challenges SMEs encounter, exacerbated by economic shifts and the pandemic. The report aims to provide an objective and comprehensive overview of SMEs' status and address their financing difficulties to support their development.

Recognizing SMEs' importance to the real economy and people's livelihoods, China has introduced various policies to fuel their growth. The balance of Inclusive loans to SMEs approached 20 trillion RMB by the end of 2021, averaging a compound growth rate of 22.1% from 2017 to 2021.

In addition to the report, FinVolution announced a strategic cooperation agreement with Kingdee FinTech to develop a digital credit system for financial institutions, aid in the digitization of SMEs, and conduct further research on SMEs.

Microfinance technology is increasingly trending in the industry, assisting financial institutions in streamlining operations and aiding SMEs in cost reduction, efficiency enhancement, and market expansion.

As shown in the report, microcredit technologies mainly comprise four areas, from customer acquisition and risk control to fund distribution and post-loan management. Fintech primarily empowers financial institutions in these areas.

In intelligent customer acquisition, FinVolution uses its proprietary "Octopus" system to realize targeted media outreach, potential user exploration, and enhance advertising effects through real-time data links, performance evaluation, decision optimization, and intelligent delivery platform.

For smart risk control, FinVolution puts in place the "Ming Mirror" fraud detection system, to analyze the characteristics and clues involving potential high-risk users through machine learning, as well as execute diversified anti-fraud strategies.

In terms of intelligent operation, FinVolution utilizes its "Lijian" post-loan management platform, covering every step of the process, from external visit to scrutiny, and from outbound call to quality inspection, thus improving task processing efficiency.

For SMEs, FinVolution offers tailored, integrated services beyond just financing, in view of their development stages and pain points. Its fintech products include a specialized section for SMEs, providing all-encompassing support for their practical needs during production and operation.

FinVolution served 504,000 SMEs in Q3 2022, facilitating 11.3 billion RMB in loans, accounting for 24.8% of the total quarterly volume and representing a 43% year-on-year increase. In the first three quarters of 2022, FinVolution served 1.75 million SMEs.