The Livelihood Response Of Rural Households To Digital Finance

Prosperity is the fundamental goal of the strategy of rural vitalization,and it is also the basic requirement of common prosperity at the current stage.The key to achieving prosperity in rural areas is to ensure a stable increase of income and promote sustainable livelihoods.This cannot succeed without sufficient financial support.However,for many reasons,rural finance is the weakest point in the country's entire financial system.It is still problematic in the aspects of limited supply of rural financial capitals,and low efficiency of capital use due to the system obstacle concerning its allocation and management.The fund shortage problem impedes the sustainable development of rural livelihoods.At the same time,the rapid spread of Internet technology has laid a solid foundation for the development of digital finance in rural areas.Digital finance can alleviate the lack of financial resources by providing high-efficiency,broad-coverage and low-cost financial services for rural households.It is a new type of financial business model in which traditional financial institutions and internet companies conduct financing,payment,investment,and information intermediary services by the internet technology.It is changing the way those services are delivered.Digital finance could relax households' liquidity constraints and widen the horizon of resource access,and thus constitutes a ‘new' context for household livelihoods.As participants in financial markets,rural households can perceive and respond to the changing financial environment.The extent of household livelihood response to the development of digital finance will ultimately affect the effectiveness of digital finance in promoting rural revitalization.This paper poses the following research questions: First,how does livelihood capitals of rural households change in the context of digital financial development? Second,can the use of digital finance promote rural households to adjust livelihood strategies and diversify livelihoods? Third,how does the livelihood diversification affect household income and contribute to the goal of prosperity? The answers to the above questions can comprehensively reveal the significance of digital financial development on rural households' livelihood,give a further understanding of the logic of digital financial services for rural revitalization from the perspective of households,and provides recommendations for promoting digital finance to better contribute to rural revitalization.The paper introduces digital financial development into the sustainable livelihood framework,follows the logic chain of "digital financial innovation-change of livelihood capital-adjustment of livelihood strategy-livelihood outcome",uses nationally representative household data to analyze the impact of digital financial innovation on rural households' livelihood capital and livelihood strategies,and explores the income effects of digital finance on household livelihoods.In particular,the paper firstly examines the role of digital finance in relaxing financial market participation constraints and promoting financial resource access and accumulation,and analyzes the changes of livelihood capital structure.Then,the impact of digital finance use on livelihood activity choices and livelihood diversification is studied.Finally,the income effects of household livelihood strategies are assessed,with a focus on the role of livelihood diversification in narrowing the income gap between different income classes.The main conclusions are as follows:(1)The development of digital finance has significantly increased financial capital of rural households.In particular,the development of digital finance has significantly increased the probability of rural households to engage in financial markets and access to credit,and led to a growing size of household financial assets holdings,thus alleviating the phenomenon of "limited participation" in rural financial markets and reducing household financial exclusion.(2)The use of digital finance is conducive to improving the structure of livelihood capital and promoting the coordination degree among various capitals.The lack of financial and physical capital results in a low level of coordination degree among household livelihood capitals.The use of digital finance can improve the accumulation of financial and physical capital and increase the proportion of both types of capital in the livelihood capitals,thus leading to the optimization of the structure of livelihood capital and a significant increase in the interlinkage and coordination degree between different livelihood capitals.(3)Overall,the use of digital finance significantly boosts rural households' participation in non-farm economic activities,but the livelihood response to digital finance varies among households with different types of livelihood activities.Households that engaged in agricultural production in the pre-digital-finance period tend to become nonfarm business owners after the adoption of digital finance,while households who engaged in non-farm economic activities such as informal business and nonfarm employment in the pre-digital-finance period are more likely to continue working after adopting digital finance.(4)Diversification is an important livelihood strategy of rural households,but the degree of diversification is not high.The use of digital finance can significantly increase rural livelihood diversification by lowering the entry barriers to nonfarm activity and broadening income sources.(5)The livelihood response of rural households to digital finance has significantly increased household income levels and reduced inequality.Livelihood diversification is found to have pro-poor potentials.Diversification has played a role in adjusting unequal distribution of income,and thus reduces income inequality.However,from the perspective of income sources,the impact of different livelihood activities on income inequality remains heterogeneous.The increase of nonfarm wage helps to reduce inequality,while the increase in business income cannot reduce total income inequality,which may be related to the high Gini coefficient of business income and its concentration in high-income households.Based on the research conclusions,the following policy insights are obtained: firstly,attaching importance to the role of digital finance in optimizing livelihood capital of rural households,and increasing the penetration rate of digital finance in rural areas.Secondly,increasing digital finance support to promote employment and entrepreneurship,and fully tapping the potential of digital finance in supporting the goal of rural revitalization.Thirdly,resolving the “bottleneck” in the course of the transformation and accumulation among various types of livelihood capital,and improving the connection between digital finance and livelihood capital.Finally,supporting the establishment of a diversified livelihood system and narrowing the income gap among rural households.