Study On The Impact Of Digital Financial Inclusion On Rural Households Formal Credit Constraints

At present,rural households in China still face the problem of expensive and difficult financing due to high transaction costs and lack of quality collateral.The lack of capital is an important factor hindering the improvement of farmers’ lives and production development,therefore,how to effectively alleviate rural households formal credit constraints and improve their production and livelihood is one of the important research topics at present.Digital inclusive finance has significant advantages in promoting the development of farmers groups,also,it allows financial institutions to effectively bias capital and technology towards more groups in rural areas,thus offering vast scope for alleviating formal credit constraints for rural households.Against this reality background,exploring whether and how digital inclusive finance can alleviate this problem of formal credit constraints for rural households is of great practical importance to improve the current situation of expensive and difficult rural financing.This paper follows the research line of "identifying problems-theoretical analysis-empirical testing-proposing policy recommendations".It takes digital inclusive finance development and the serious formal credit constraints faced by rural households as the starting point,with the ultimate goal of effectively alleviating rural households formal credit constraints.This paper asks the question of how the development of digital inclusive finance can alleviate the formal credit constraint of rural households.It summarises the research on the impact of digital inclusive finance on rural households formal credit constraints from both theoretical and empirical analyses,clarifies the direct and indirect paths of digital inclusive finance to alleviate formal credit constraints of rural households.On this basis,an analytical framework is constructed,it shows that digital inclusive finance not only has a direct effect on rural households formal credit constraints by reducing transaction costs,alleviating information asymmetry and enhancing the scope of credit services,but also alleviates rural households formal credit constraints through the indirect effects of the information knowledge acquisition effect and the digital payment convenience effect.Based on the logic above,three hypotheses are proposed for testing.Then,this paper uses the sample data from the Peking University Digital Inclusive Finance Index for three years,2014,2016 and 2018,and the China Household Finance Survey(CHFS)for three years,2015,2017 and 2019,to conduct the following empirical study: in the first step,a preliminary evaluation of the mitigation effect of the total digital inclusive finance index and sub-indicators on rural households formal credit constraints is conducted,it also examines the direct effects of digital inclusive finance on reducing transaction costs,alleviating information asymmetry,and enhancing the scope of credit services to alleviate the formal credit constraints of rural households;In the second step,endogeneity analysis is performed,mainly by introducing instrumental variables and lagged core explanatory variables;in the third step,robustness testing is performed,mainly by splitting the sample and replacing the core explanatory variables as well as the econometric model.In the fourth step,multiple validation of the micro-level mechanism of digital inclusive finance in alleviating rural households formal credit constraints is carried out using the mediating effects test,the introduction of interaction terms;in the fifth step,differences in the effects of digital inclusive finance in alleviating rural households formal credit constraints are analyzed through regional heterogeneity,risk preference heterogeneity and income heterogeneity.The study finds that:(1)digital inclusive finance greatly alleviates the formal credit constraint of rural households,and its direct effect is that digital inclusive finance can cut transaction costs,reduce information disparity,and expand the range of financial services,thus lessening the formal credit constraints of rural households.It is found that compared to the depth of use and the degree of digitization,breadth of coverage plays the largest role in alleviating formal credit constraints for rural households.(2)On the one hand,digital financial inclusion enhances rural households’ attention to financial information and widens the access to information,thus enhancing rural households’ access to information knowledge;on the other hand,it increases the frequency of online shopping and promotes digital payment methods,thus improving the convenience of digital payment.In turn,both the information knowledge acquisition effect and the digital payment convenience effect can significantly reduce the probability of rural households being constrained by formal credit.(3)There is differences in the effect of digital inclusive finance on alleviating rural households’ formal credit constraints in terms of region,risk preferences and income.In terms of regional heterogeneity,compared to the central and eastern regions,the western region is the most affected by digital financial inclusion in terms of alleviating rural households’ formal credit constraints.In terms of risk preference heterogeneity,compared to risk averse and risk neutral groups of farmers,digital inclusive finance is more effective in alleviating formal credit constraints for the risk-chasing group of rural households.In terms of income heterogeneity,compared to high and middle income rural households,the alleviating effect of low-income farmers is not significant.Based on the above findings,this paper proposes the following policy recommendations to improve the development of digital inclusive finance and thus alleviate the formal credit constraints of rural households from three perspectives,cultivating farmers’ own digital financial literacy,improving the digital credit services of financial institutions,and optimizing the inclusive support policies of government departments:(1)The conditions for farmers’ participation in the market should be optimized,farmers’ access to information knowledge should be enhanced,and the publicity and promotion of digital payment technology should be strengthened to enhance the convenience of farmers’ digital payments.(2)Financial institutions should first strengthen the integration of traditional business and digital technology,increase supervision and reduce transaction costs;second,build digital information platforms and open up information sharing mechanisms;third,actively implement policies to benefit farmers and broaden the scope of financial services.(3)Government departments should expedite the integration of digital inclusive financial development into the digital village construction system,implement differentiated government support-type policies,focus on improving formal credit constraints in the western rural areas,pay attention to the mitigation of formal credit constraints for risk-chasing groups of farmers,and weaken the negative impact of the digital divide phenomenon,so that low-income farm households can also catch the last train of the digital dividend.