The Impact of Digital Inclusive Finance on the Sustainable Growth of Income of Herdsmen in China’s Pastoral Areas

Abstract

The sustainable growth of income for farming households in pastoral areas represents a crucial challenge not only for China but also for other developing nations in the process of transition to ecologically friendly models. The scarcity of assets available for collateral, along with vulnerable production conditions and developmental shortcomings, pose significant barriers to the consistent expansion of herdsmen’s income. This paper analyzes the impact of digital financial inclusion on the income of herdsmen in ethnic minority regions using panel data models from nine major pastoral provinces in China from 2011 to 2022. Through a fixed-effects model approach, the analysis delves into the influence of digital financial inclusion and subjects it to multi-dimensional and robustness tests to ensure the reliability of the findings. Furthermore, the research explores the underlying mechanisms through which digital financial inclusion contributes to income enhancement for herdsmen in these areas, employing mediation effect techniques to provide deeper insights into the relationship between digital financial services and economic upliftment in remote ethnic communities. The research findings indicate that digital financial inclusion has a positive impact on the income of herdsmen in ethnic minority regions. The breadth of coverage, depth of usage, and level of digitalization of digital financial inclusion all play a significant role in enhancing the income levels of herdsmen. In terms of the degree of influence, the impact of digital finance on the income of ethnic minorities follows this order: depth of usage > degree of digitalization > breadth of coverage. Notably, through financial backing that catalyzes a shift in herdsmen’s production methodologies and propels industrial upgrading, there is a profound potential to increase herdsmen’s output efficiency. This, in turn, alleviates the ecological strain on China’s environmentally delicate zones. Moreover, financial backing can condense the breeding periods for herdsmen, thereby ameliorating the ecological degradation associated with excessive grazing in pastoral regions. A mediating-effect analysis reveals that digital financial inclusion can boost economic development in ethnic minority regions by increasing wage income, raising per capita GDP levels, and promoting industrial structure upgrading. This, in turn, leads to an improvement in the income of herdsmen in these regions. This is particularly pertinent in China, where the eco-fragility of pastoral regions coincides with the modest income of herdsmen, underscoring the critical importance of herdsmen’s finance. To foster sustainable progress in these regions, financial backing is imperative to elevate herdsmen’s income and to induce a transformative shift in production approaches and industrial layout, paving the way for the sustainable development of these pastoral regions.