Digital inclusive finance: A lever for SME financing?

Abstract

This paper systematically investigates the relationship between digital inclusive finance and small and medium enterprises (SMEs) financing constraints. We extrapolate the influence model between them from an economic theory perspective and conduct an empirical test using two-way fixed effects and a mediation effect model. The results show: (1) Digital inclusive finance significantly alleviates the financing constraints of SMEs; (2) Compared to the breadth of coverage, the depth of use of digital inclusive finance has a more noticeable effect; (3) The alleviation effect of digital inclusive finance exhibits heterogeneity. It can correct the attribute mismatch, field mismatch, and regional mismatch of traditional financial loan services; (4) Digital inclusive finance alleviates SME financing constraints by reducing financing costs and controlling leverage levels, increasing internal sources of enterprise funds. This research is significant for promoting digital inclusive finance to alleviate the financing difficulties of SMEs in China and provides valuable solutions for other countries to mitigate the “Macmillan Gap” phenomenon.