Does Inclusive Digital Finance Foster Rural Household Entrepreneurship: Evidence From the China Family Panel Studies

This paper evaluates the impact of digital financial inclusion (DFI) powered by digital technologies on rural household vulnerability to poverty based on data from the China Family Panel Studies (CFPS) and DFI data from the Institute of Digital Finance Peking University. The results show that both DFI and its secondary indicators reduce rural household vulnerability to poverty. Household entrepreneurship is an intermediary factor of DFI influencing vulnerability to poverty; that is, DFI stimulates rural households’ entrepreneurial behavior, thereby reducing their vulnerability to poverty. Through the analysis of income heterogeneity, financial development level, and human capital in the region, it is found that DFI is more helpful in reducing the vulnerability to poverty for rural households with low income, a low level of financial development and low human capital. Therefore, the Chinese government should map out the DFI development path, build a DFI control system with internet technologies, and actively play the mutually supporting role of DFI and other influencing factors to boost DFI development, minimize the risk of returning to poverty and thereby reduce rural household vulnerability in China.

With the deep integration of Internet technology and finance, digital finance has become an indispensable part of inclusive finance and an important driving force for the development of inclusive finance. How inclusive finance affects household wealth under the background of digital penetration has become a hot issue. Based on the advantages of digital finance, this paper compares the differences between traditional and digital inclusive finance, and discusses the mechanism and effect of digital inclusive finance in promoting household wealth.Based on the panel data of China Family Panel Studies（CFPS）, this paper finds that digital inclusive finance helps to increase the level of household wealth, and has greater inclusiveness and a stronger leverage effect than traditional finance. This conclusion is further confirmed by 2SLS test with “geographical distance” as the instrumental variable. Different business types of digital inclusive finance have different promotion effects. Monetary fund, electronic payment and other business types have obvious promotion effects on the overall household wealth. Insurance, credit, online investment and electronic credit also have certain positive effects on the overall wealth, but the impact is small. According to the results of heterogeneity test, the effect of digital inclusive finance on household wealth in the central and western regions is stronger than that in the eastern regions; the role of digital inclusive finance in promoting the increase of household wealth depends on the family’s education level and understanding ability, and has a stronger role in promoting the families with high education level and high understanding ability. The degree of digitalization has a significant negative impact on the overall household wealth, which may be related to the phenomenon of “digital exclusion” in digital inclusive finance. Digital exclusion may weaken the role of digital inclusive finance in promoting the growth of household wealth to a certain extent.The research shows that in order to play the positive role of digital inclusive finance in benefiting the real economy and promoting the growth of household wealth, government departments should promote the deep integration of digital finance and traditional finance, give full play to the respective advantages and characteristics of digital finance and traditional finance, and build a complementary and mutually reinforcing financial service system.This study expands the existing research in three aspects: First, based on the background of digital penetration into the financial field, it examines the mechanism and function of digital inclusive finance on household wealth. Second, it compares and tests the differences between digital inclusive finance and traditional inclusive finance in promoting household wealth. Third, it tries to use geographical distance as an instrumental variable to overcome endogeneity and carry out comprehensive heterogeneity analysis.

PurposeThis paper examines the impact and mechanism of China's digital inclusive finance on rural consumption upgrade. First, the impact of the development of digital inclusive finance on the upgrading of rural household consumption structure is to be theoretically analyzed and empirically tested. Secondly, in terms of heterogeneity analysis, it pays attention to the age heterogeneity of users that digital inclusive finance influencing rural residents' developmental consumption upgrade, which is related to the issue of intergenerational “digital gap”. Thirdly, the mechanism of digital inclusive finance in promoting rural consumption upgrade is to be investigated. Finally, how to promote the role of digital inclusive finance in upgrading the structure of rural consumption to a developmental demand level will be showed.Design/methodology/approachFrom the perspective of the micro-household, this study is conducted by using the instrumental variable (IV) method, with 2SLS model and IV-Tobit model, based on the matched city-level data of Digital Inclusive Financial Index (DIFI) with the Chinese Household Financial Survey (CHFS). “The relief degree of land surface” is an ideal instrumental variable of digital inclusive finance, for including regional altitude difference and terrain factors of regional area, has theoretical influence on the development of digital inclusive finance, and is not affected by other economic variables.FindingsThe conclusions show that the digital inclusive finance plays a significant role in promoting the rural households' developmental consumption, but has no significant effect on the rural households' survival-type consumption and hedonistic consumption. Furthermore, this paper examines the impact and mechanism of China's digital inclusive finance on rural consumption upgrade. First, the impact of the development of digital inclusive finance on the upgrading of rural household consumption structure is to be theoretically analyzed and empirically tested. Secondly, it is discovered that digital inclusive finance is age heterogeneous in promoting the upgrade of consumption structure of rural household, and its effect on the elderly is weaker than that on the young for the intergenerational “digital gap”. Thirdly, these conclusions reveal that the digital inclusive finance does affect the consumption of rural residents through three mechanisms: increasing income and wealth, easing liquidity constraints and facilitating payment methods. Finally, how to promote the role of digital inclusive finance in upgrading the structure of rural consumption to a developmental demand level will be showed.Originality/valueThe current research on the relationship between digital inclusive finance and rural consumption only stays at the level of total rural consumption and has not stressed the structural problems of rural consumption. Can digital inclusive finance promote the upgrade of rural consumption structure? To what level can digital inclusive finance promote the upgrading of rural consumption structure? Therefore, it is of great theoretical value to study the upgrading of rural consumption structure from the micro level. Can the current digital inclusive finance benefit the elderly and help break the vulnerability of the elderly to enjoy finance? In this regard, evidence of heterogeneity remains to be provided.

ABSTRACTTechnology is a double‐edged sword. Departing from extant literature that centres on urban households, this study is the first to document the long‐run dynamic effects of digital inclusive finance on rural household debt risk in China. Using four waves (2016–2020) of the China Family Panel Studies (CFPS), we identify both the impact and underlying mechanisms. Results indicate that digital inclusive finance (DFI) significantly raises rural households' leverage by fueling material aspirations and reducing income uncertainty. The effect is most pronounced in the central and western regions, among purely agricultural households, and among those owning two dwellings. This study contributes new empirical evidence on the relationship between DFI and debt risks among rural households, thus offering valuable insights for policymakers in developing countries striving to foster the development of DFI in rural areas.

As an innovation in traditional inclusive finance, digital inclusive finance is an important way to coordinate the income gap between urban and rural areas, popularize financial products and services, and promote the digitalization process. Therefore, this study matches the digital inclusive finance index with the Chinese household tracking survey, uses a panel data econometric model, a mediation effect model, and a moderation effect model to control for the characteristics of heads of households and families, and explores the impact mechanism of the development of digital inclusive finance on inclusive growth in urban and rural areas in China, with a view to providing a scientific basis and policy suggestions for promoting inclusive growth. The study finds that: First, digital inclusive finance has a significant income-increasing effect on both urban and rural households, among which it has a greater impact on rural households, which is conducive to narrowing the income gap between urban and rural areas; Second, digital inclusive finance improves rural household income and narrows the income gap between urban and rural areas by promoting rural household entrepreneurship and business activities and alleviating the formal credit constraints of rural households; Third, digital inclusive finance can generally promote families with access to the Internet, a strong ability to use digital tools, and small information constraints to start businesses and obtain formal credit. This study innovatively incorporates entrepreneurial quality into the research of the transmission mechanism; three theories of the "digital divide" are put forward and tested. Research value: Clarifying the transmission mechanism of digital inclusive finance to promote inclusive growth, and providing policy suggestions for the development of digital inclusive finance.

This study examines the effectiveness of Digital Financial Inclusion (DFI) in alleviating the vulnerability of expected poverty (VEP) among rural households in China by utilizing data from the China Family Panel Studies (CFPS) from 2012 to 2020. The results demonstrate a mechanism that DFI significantly reduces VEP among rural households by stimulating entrepreneurial activities. However, this mechanism exhibits a distinct ‘digital divide’ where households below the poverty line of $1.90 per day fail to utilize DFI to mitigate their VEP status, due to insufficient digital literacy, lower risk tolerance, and higher risk aversion. By analysing the marginal effects of control variables such as the head of household’s occupation, family size, and healthcare, this study provides valuable conclusions and additional empirical evidence to eliminate rural vulnerability. This study carries significant implications for extending the benefits of deepened DFI reforms to greater numbers of impoverished households.

Expanding and stabilizing the middle class is critical for reducing income disparities, promoting social equality, and fostering sustainable economic growth. However, the middle class faces considerable vulnerability, which challenges achieving these goals. Digital inclusive finance, as a transformative financial innovation, offers potential solutions to mitigate this vulnerability, yet its role remains insufficiently explored in the existing literature. This study aims to examine the impact of digital inclusive finance on reducing middle-class vulnerability, with a specific focus on its mechanisms and inclusiveness. Using data from the China Family Panel Studies, the analysis employs the Vulnerability as Expected Poverty (VEP) model to quantify middle-class vulnerability and explore the protective effects of digital inclusive finance. The findings demonstrate that digital inclusive finance significantly reduces middle-class vulnerability, a result validated through robustness checks. Mechanism analysis reveals that digital inclusive finance enhances entrepreneurial activities, financial participation, and employment opportunities, collectively contributing to its protective effects. Additionally, the study highlights the inclusive nature of digital finance, as it helps bridge the ‘digital divide’ across regions, urban and rural areas, education levels, and age groups. The findings suggest that policymakers and financial institutions should prioritize expanding access to digital inclusive finance by improving digital infrastructure and financial literacy programs. Targeted initiatives, such as subsidizing digital tools or incentivizing financial innovation, could effectively reduce middle-class vulnerability.

Xie, W.; Wang, T., and Zhao, X., 2020. Does digital inclusive finance promote coastal rural entrepreneurship? In: Yang, Y.; Mi, C.; Zhao, L., and Lam, S. (eds.), Global Topics and New Trends in Coastal Research: Port, Coastal and Ocean Engineering. Journal of Coastal Research, Special Issue No. 103, pp. 240–245. Coconut Creek (Florida), ISSN 0749-0208.Digital inclusive finance has become a very useful financing channel other than formal finance and informal finance by alleviating financial exclusion, reducing service costs and improving financing efficiency, realizing the complementary effect of financing and promoting rural residents' entrepreneurship. Based on the database of digital inclusive financial development and the database of China Family Panel Studies (CFPS), this paper studies the relationship between the development of digital inclusive finance and coastal rural residents' entrepreneurship. The empirical results show that the development of the depth of digital Inclusive finance has a significant role in promoting rural entrepreneurship. The payment index and the monetary fund index also have a significant positive impact on rural residents' entrepreneurship. It is also found that the impact of digital inclusive finance on rural residents' entrepreneurship is characterized by regional heterogeneity. The development of digital inclusive finance significantly promote the entrepreneurship of rural residents in the central inland region, but not significant in the eastern coastal region and the western inland region.

Digital inclusive finance (DIF) is regarded as a key instrument in poverty alleviation efforts. However, existing research reveals significant gaps in understanding its poverty-reduction impact: the debate on its inclusivity remains unresolved, its mechanisms of action are unclear, and the psychological empowerment dimension has been largely overlooked. Using micro-level data from seven waves of the China Family Panel Studies (CFPS) from 2010 to 2022, this study employs fixed-effect models, quantile regression models, and mechanism analysis to explore the differentiated impact of digital inclusive finance on rural multidimensional relative poverty and the mechanisms at play. The empirical findings reveal that DIF significantly mitigates multidimensional relative poverty, with more pronounced marginal effects among the poorest households, confirming its pro-poor characteristics. Heterogeneity analysis reveals that, at the regional level, DIF has greater impacts in western regions and remote rural areas farther from county centers; at the individual level, it is particularly effective for women, those with lower education, and individuals with limited digital literacy. Mechanism analysis shows that DIF operates through three channels: promoting employment, encouraging entrepreneurship, and enhancing financial accessibility. Moreover, extended analysis demonstrates that DIF also fosters the endogenous motivation of rural households to escape poverty, as reflected in heightened confidence about the future, increased belief in social mobility and returns of work, and reduced perceived barriers to employment. These findings provide new micro-level evidence to unpack the poverty-alleviation potential of DIF.

With Chinas overall victory in the battle against poverty, consolidation and expansion of poverty alleviation results and preventing a large-scale relapse into poverty have become key problems of the new era. Rural households suffer especially significant poverty vulnerability issues as a result of their sole source of income and weak risk resistance abilities. How digital inclusive finance influences the vulnerability of rural households to poverty and what its mechanisms are need thorough theoretical research and empirical testing. Based on China Household Finance Survey data and Digital Inclusive Finance Index, this study examines the impact effects and mechanisms of digital inclusive finance on the poverty vulnerability of rural households by Probit model. It creates a set of overall indicators for the poverty vulnerability of rural households including financial margins, debt servicing capability, and risk insurance capacity, and divides it into four levels. From the empirical results, it can be seen that digital inclusive finance has played a positive role in poverty reduction risks of rural household, and it shows a strong anti-poverty effect. From the mechanism test results, it can be seen that financial asset diversification is a channel through which digital inclusive finance affects the rural poverty vulnerability, because digital inclusive finance helps the rural households to allocate their financial assets in a more diversified way, thus reducing their poverty vulnerability. The research conclusions can provide significant theoretical foundation and policy reference for consolidating and expanding the results of poverty alleviation, as well as preventing a large-scale return to poverty.

Improving agricultural total factor productivity is crucial for comprehensive rural revitalization and building a strong agricultural nation. Digital inclusive finance amalgamates the benefits of digital technology and inclusive finance, mitigating financial exclusion in agricultural production. It fosters rural revitalization and the modernization of agriculture by bolstering farmers' innovation, entrepreneurship, and agricultural technology advancements. Consequently, it significantly enhances overall agricultural total factor productivity. This study uses panel data from 2011 to 2020 to empirically investigate the impact and mechanism of digital inclusive finance on agricultural total factor productivity in Zhejiang Province, China. The research results show that digital inclusive finance significantly enhances agricultural total factor productivity in Zhejiang Province, which holds true even after a series of robustness tests. Analysis of the mechanism reveals that the integrated development of rural industries plays a crucial mediating role in empowering agricultural total factor productivity through digital inclusive finance. Furthermore, heterogeneity analysis indicates that the positive effect of digital inclusive finance on agricultural total factor productivity is more pronounced in the northeastern region of Zhejiang Province and in areas ranked in the second tier of agricultural development. Therefore, we recommend comprehensively enhancing the development of digital inclusive finance in rural areas, fostering a financial ecosystem that integrates rural industries, promoting the coordinated development of digital inclusive finance in different regions, and comprehensively improving agricultural total factor productivity.

PurposeThis paper aims to investigate the impact of digital inclusive finance on entrepreneurial activities in rural areas, as well as the underlying mechanisms and the variations of this impact across regions and household characteristics.Design/methodology/approachUtilizing the China Household Finance Survey Data, this paper applies the Two-Stage Least Squares with instrumental variables to assess the effect of digital inclusive finance on rural entrepreneurship.FindingsThe empirical findings indicate that digital inclusive finance significantly promotes entrepreneurial activities in rural areas by alleviating credit constraints, reducing financial information barriers, and altering risk attitudes for rural households. Additionally, this effect is more pronounced in the eastern region of China and for the “opportunity entrepreneurial activities.” Furthermore, the impact varies across rural households' income and consumption status, as well as the personal characteristics of household heads.Originality/valueFirstly, this study broadens our understanding of the mechanisms through which digital inclusive finance influences entrepreneurial activities, thereby filling a gap in existing entrepreneurship research. Secondly, the study's findings affirm the inclusive nature of digital finance, contributing significantly to the literature on regional equality and illuminating potential pathways toward achieving “common prosperity.”

As displayed by data published by the 2012–2020 China Family Panel Studies and the data from the Institute of Digital Finance, Peking University, this paper has studied the promotion and heterogeneity of digital inclusive finance on entrepreneurship of rural households with a two‐way fixed‐effect model. Through logit regression, results show that digital inclusive finance can effectively promote rural entrepreneurship, and the research has successfully passed the robustness test, further confirming the reliability of the findings. Meanwhile, as indicated by the analysis of heterogeneity, it is also found that digital inclusive finance demonstrates a stronger promotion effect on rural households in the central region and households with medium education level. In particular, the large size of a family also plays a certain role in encouraging the entrepreneurship of rural households. Ultimately, this paper puts forward several strategies and suggestions to enhance digital inclusive finance and facilitate the development of entrepreneurship among rural households.

The global landscape of digital financial inclusion aims to extend broader, more accessible, and cost-efficient financial services via digital channels to those marginalized by conventional financial systems. Particularly in developing countries, household economic and financial fragility remains a pressing concern. Economic vulnerability denotes the incapacity of households to withstand unforeseen difficulties in the wake of economic downturns, precipitating a significant deterioration in living standards. This research investigates the role of digital financial inclusion in diminishing household economic vulnerability and enhancing the efficacy of financial services to address this challenge. Employing a fuzzy rough set algorithm to examine the China Family Panel Studies (CFPS) dataset, our analysis identifies critical factors of household economic vulnerability and their interaction with digital financial inclusion services. Findings demonstrate that digital financial services markedly reduce household economic vulnerability, evidenced by a 12% improvement in household solvency and a 20% uplift in financial resilience. Rural and lower-income families derive the most significant benefits from digital financial inclusion. Furthermore, the study underscores the importance of advancing financial literacy and refining financial product design as pivotal strategies in mitigating household economic vulnerability. This research offers valuable insights for policymakers and financial service providers on leveraging digital technology to bolster household economic stability.

With the rapid development of digital technology in China, Digital Inclusive Finance, which uses digital financial services to promote financial inclusion, is developing rapidly. This paper uses the Peking University Digital Financial Inclusion index of China and China Family Panel Studies (CFPS) data to construct a predictive model using the LightGBM machine learning algorithm to study whether Digital Inclusive Finance can predict household wealth and analyze the characteristics of strong predictive ability for household wealth. They found that: (1) the introduction of the Digital Financial Inclusion index can improve the prediction performance of the household wealth model; (2) financial literacy and age characteristics are the key characteristics of household wealth accumulation; (3) the coverage and depth of Digital Inclusive Finance has a significant effect on family wealth accumulation, but the degree of digitization acts as a disincentive factor. This paper not only uses machine learning methods to do research on Digital Inclusive Finance and family wealth from a more comprehensive perspective, but also provides effective theoretical support for the key factors that enhance family wealth.