Does digital finance help reduce self-rationing of small and medium-sized enterprises? Evidence from China

Haiqiang Chen and Yuling Yuan

Economic and Political Studies, 2024, vol. 12, issue 4, 421-440

Abstract: Due to high rejection rates and the costly and time-consuming application procedures, small and medium-sized firms may be discouraged from applying for a bank loan, thus resulting in the so-called self-rationing behaviour. Using the World Bank Enterprise Survey Data collected from 2,700 privately owned firms in China during 2011–2013, we document that there exist a significant number of small and medium-sized enterprises (SMEs) which have good performance and financing needs, but are discouraged from applying for a bank loan. We theoretically and empirically show that digital finance development can alleviate the self-rationing behaviour of SMEs. The mechanism analysis shows that, from the supply side, digital finance development enhances the probability of loan approval and the proportion of private firms’ working capital financed by banks, and reduces the obstacle to access bank loans; while from the demand side, the development of digital finance improves financial inclusion and the financial literacy of firms. Our findings suggest that digital finance development improves loan efficiency and helps SMEs better access bank credits.

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/20954816.2023.2292373 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:repsxx:v:12:y:2024:i:4:p:421-440

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/reps20

DOI: 10.1080/20954816.2023.2292373

Access Statistics for this article

Economic and Political Studies is currently edited by Qing He and Cunna Li

More articles in Economic and Political Studies from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().