Rural Finance Opportunities in China

Rural China represents a major opportunity for financial services firms: Accenture outlines the challenges and proposes five principles that should be followed in order to penetrate this complex marketplace.

From the steppes of Inner Mongolia to the tropical islands of Hainan Province, half of rural Chinese households lack access to banks or other formal financial services. With central government blessing, that will change over the next decade. But Chinese and multinational players considering this vast and variegated market will need innovative marketing and business models, a taste for on-the-ground campaigning and patience.

The four big state banks reduced their presence in rural areas by more than 43 percent in 10 years, and the People’s Bank of China estimates that only 36 percent of rural households currently have financial services. This lack of financial services is in part the result of the migration out of rural areas by major Chinese banks that saw better opportunities in the urban areas.

Indications are that there is pent-up demand for financial services in these rural areas. A 2009 report by Mastercard and CLSA found that 59 percent of rural households expected to increase spending in 2010, as against 41 percent of urban households. The government has singled out development of rural infrastructure, education and finance as top priorities in its 12th five-year plan, and the China Banking Regulatory Authority has promised that basic banking services will be available in all villages and towns by 2013.

As a result, foreign and local banking firms are starting to move back into the rural areas. However, these institutions must bear in mind that rural China has structural challenges, including a lack of physical and technical infrastructure, vast distances, and lower income levels.

Finding the route to success—and ultimately high performance—in rural China will require financial firms to revisit their strategies. Based on its experience in the field, and observations of other firms’ experiences, Accenture suggests five principles that should inform their thinking:

• China’s rural markets are far more varied than they appear at first glance.


• Prepare to invest in education of both customers and staff.


• Standard, exported business models fall flat. Innovation and customization should be the watchword for operations and marketing.


• To secure a firm foothold, seek out strong local partners.


• Develop robust risk-control and IT systems.

Alison Kennedy is the managing director for Strategy Consulting at Accenture Greater China. Based in Beijing, the focus of her work is in supporting Chinese clients to grow their business internationally and supporting multinational clients to grow their business in China. In addition, she is also the head of Management Consulting in financial services across the Asia Pacific region. Ms. Kennedy has specific functional experience and specialization in merger and acquisition (both pre- and post-merger activities), geographic expansion, growth and innovation and business and organizational design.

Albert Chan is a senior executive of Accenture China and is the director of Accenture’s office in Guangzhou. In addition, he is the head of Accenture banking services for Greater China, responsible for business and technology consulting and outsourcing services to banking organizations in the region. With 20 years of consulting experience, Chan has been heavily involved in designing and building advanced core banking, customer relationship management, e-commerce, risk management and enterprise performance management business architectures for major financial services institutions in Greater China.