Social finance in emerging markets: Insights into Chinese individual investor preferences with broader implications

Abstract

Social finance, which integrates social impact with financial returns, is increasingly recognized as a catalyst for sustainable socio-economic development. This study presents an empirical analysis of Chinese individual investors' preferences for social finance products, using a customized choice experiment. The results reveal a strong investor preference for products with high annualized returns, short investment tenures, a focus on the healthcare sector, government backing, and flexible redemption options. By applying latent class analysis, we identify three distinct investor segments: Flexible Savers, Holistic Benefit Assessors, and Economic Return Seekers. The study also examines how demographic characteristics such as age, education, income, risk tolerance, philanthropic involvement, and awareness of social finance are associated with distinct investor segments. The findings suggest that future efforts should focus on designing social finance products that align with the diverse needs of these investor segments, thereby enhancing the appeal and effectiveness of social finance initiatives. Such tailored strategies could play a pivotal role in mobilizing private capital for social finance, maximizing its potential to drive sustainable socio-economic progress in emerging markets.