Unlocking the potential of digital finance: digital bank credit’s impact on traditional banking for SMEs in China

Yuhong Huang (), Jiale Jia () and Yingwei Ren ()
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Yuhong Huang: Southwestern University of Finance and Economics
Jiale Jia: Southwestern University of Finance and Economics
Yingwei Ren: Chengdu Textile College

Eurasian Economic Review, 2025, vol. 15, issue 2, No 3, 317-351

Abstract: Abstract Based on the China Micro and Small Enterprise Survey and Digital Financial Inclusion Index, this paper studies the influence and mechanism of the credit development of digital bank on traditional credit of banks. The empirical results show that there is a crowding out effect of digital credit on the demand of bank traditional credit of small and micro enterprises (SMEs). And due to the rent-seeking problem in traditional bank credit business, digital credit significantly reduces the rent-seeking motivation of SMEs to maintain the bank-enterprise relationships, and reduces the entertainment expenses, including hosting meals, giving gifts, especially those involving high-end venues and the presentation of expensive gifts; while for SMEs with the demand of bank credit, the rent-seeking motivation and entertainment expenses increase significantly. Moreover, the crowding out effect of digital credit mainly occurs in SMEs without bank-enterprise relationships and areas with low degree of financial marketization. The research conclusion has certain guiding significance for adjusting the market layout and optimizing small and micro credit business.

Keywords: Digital credit; Credit demand; Bank-enterprise relationships; Rent-seeking (search for similar items in EconPapers)
JEL-codes: D72 G21 G29 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s40822-024-00301-y

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