Digitalization, financial inclusion, and small and medium-sized enterprise financing: Evidence from China

Xiaoyan Zhang, Jinbao Li, Dong Xiang and Andrew Worthington

Economic Modelling, 2023, vol. 126, issue C

Abstract: This study investigates the impact of a new digitalization policy implemented in seven pilot zones in China on small and medium-sized enterprises (SMEs) and their access to finance. Given the limited evidence on how digitalization promotes financial inclusion, we employ a quasi-natural experiment approach to assess its effects. Our findings demonstrate that digitalization is more effective than traditional approaches in alleviating SMEs' financing constraints and enhancing financial inclusion. Specifically, the utilization of digital financial services, such as payment, money funds, credit, insurance, and investment, plays a crucial role in mitigating information asymmetry and facilitating SMEs' access to finance. These results provide support for the ongoing digital transformation of SMEs and financial institutions, emphasizing the significance of information-bearing through digital channels.

Keywords: Digital financial inclusion; Financing constraint; Small and medium-sized enterprise (SME); Quasi-natural experiment (search for similar items in EconPapers)
JEL-codes: C24 G21 G32 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:126:y:2023:i:c:s0264999323002225

DOI: 10.1016/j.econmod.2023.106410

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