A Positive Mutual Impact between Inclusive Finance and Poverty Alleviation

The contradiction between profitability requirement of commercial finance and non-profitability nature of inclusive finance inhibits bankers’ motivation in providing financial services to peasants, further restricting the already narrow financing channels for low-income rural households and preventing them from jumping out of the poverty trap. There is a mutual promotion relationship between inclusive finance and poverty reduction. On one hand, providing affordable and subsidized financial services to farmers can help them increase income steadily; On the other hand, the institutions reap a good payoff by business expansion, a thick base of loyal clients, as well as public recognition, which in turn stimulates the institutes to provide more financial products, improve their service quality and scale up the investment amount for low-income farmers. Nevertheless, to set off this positive feedback loop process, a forcible intervention by government is needed. On the base of theoretical analysis and practical research, this article brought related advice for financial institutions in order to promote the development of inclusive finance and alleviate the financing difficulties of peasant households to realize poverty alleviation.