Does digital inclusive finance promote agricultural production for rural households in China? Research based on the Chinese family database (CFD)

Abstract

PurposeThe development of digital inclusive finance appears to be able to solve the difficulty of traditional finance, which cannot completely cover agriculture and farmers and provides better financial services and products to Chinese farmers. Thus, it improves the farmers' enthusiasm for agricultural production. The purpose of this paper is to clarify whether this goal is indeed being achieved.Design/methodology/approachThis paper theoretically analyzes the mechanism that influences the effect of digital inclusive finance on rural households' agricultural production decisions and conducts an empirical study based on a sample from the Chinese family database (CFD).FindingsFirst, the development of digital financial inclusion in general can encourage rural households to reduce agricultural production. Second, the negative effect of digital inclusive finance on households' agricultural output is realized by widening the gap between the efficiency of non-agricultural economic activities and the efficiency of agricultural production. The wider the gap is, the lower the enthusiasm of households for agricultural production. Third, the mediating effect of “digital financial inclusion – difference in efficiency – agricultural output” has a significant negative effect on households with low agricultural production efficiency, but not households with high agricultural production efficiency. Digital inclusive finance has no significant effect on the difference in efficiency between the two economic activities of high-efficiency households, but a greater difference in efficiency between the two economic activities corresponds to higher enthusiasm of households for agricultural production.Originality/valueTo the best of our knowledge, this paper is the first to analyze the impact of digital financial inclusion on Chinese farmers' agricultural production. The findings of this study can provide policy-related insights to help local governments promote the development of digital finance in China's agricultural economy.

Poverty reduction in rural China: Does the digital finance matter?

“…We find that digital finance is more beneficial for older and uneducated rural households to escape poverty. Furthermore, our results further enrich the relevant literature on the inclusive finance and functions of digital finance [ 2 , 17 , 22 , 28 ].…”

“…China’s digital finance is mainly mobile payments, online loans, digital insurance and online investments [ 25 – 27 ]. With the spread of the Internet and smartphones, digital finance in China has made great strides, which has greatly increased the accessibility and convenience of formal financial services, especially for those who previously did not have access to them [ 28 – 30 ]. However, since research on the impact of digital finance on poverty reduction is still very limited, we try to explore the role of digital finance in China’s rural poverty reduction, as China is the most widely used country for digital finance in the world.…”

The Protective Effect of Digital Financial Inclusion on Agricultural Supply Chain during the COVID-19 Pandemic: Evidence from China

“…One reason might be rural households' differing experiences of participating in financial inclusion. Research has shown that farmers who have experienced financial inclusion are more likely to use such services again [27,[72][73][74]. Farmers' experience with inclusive finance can expand digital financial widening and deepening, which in turn increases the effect of digital financial inclusion.…”

“…The PKU-IFDI includes sub-indexes for financial inclusion widening, financial inclusion deepening, and financial inclusion digitalization, which are the mechanisms in our theoretical framework. Studies have described the calculation methodology and scientific nature of this index [72][73][74]. To illustrate the representativeness of the data, firstly we showed the correlation between prefecture-level PKU-IFDI and prefecture-level GDP in 2018 in Figure 3, where we found a significant positive relationship between the two (0.82).…”

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