Digital inclusive finance and entrepreneurship in rural areas: evidence from China

Abstract

Purpose

This 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/approach

Utilizing 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.

Findings

The 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/value

Firstly, 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.”

Citation

Yu, C., Hui, E.C.-m. and Dong, Z. (2024), "Digital inclusive finance and entrepreneurship in rural areas: evidence from China", China Agricultural Economic Review, Vol. 16 No. 4, pp. 712-730. https://doi.org/10.1108/CAER-07-2023-0201