Impact of Digital Inclusive Finance on Household Formal Credit: Evidence from China Household Finance Survey

Abstract

In this paper, whether and how digital inclusive finance affects households’ formal credit are discussed. Based on the data of China Household Finance Survey from 2013 to 2017 and the province-level DFI index, we find that compared with traditional financial services, digital inclusive finance has higher flexibility, which can effectively reduce information asymmetry and transaction costs, and digital payment channels also significantly improve households’ access to formal credit. However, it is found that the government intervention has a negative impact on household formal credit, which may be due to policy differences or regional discrimination. Therefore, when deepening the development strategy of digital inclusive finance, it is necessary to strengthen the construction of digital financial infrastructure, especially in rural areas and the central and western regions, so as to improve the underdeveloped situation of digital financial services. Additionally, it is necessary to develop tailored policy measures for different households when a comprehensive approach that considers various factors, such as education level, income level, and geographic differences. JEL classification numbers: D12, G21, G28. Keywords: Digital inclusive finance, Household formal credit, Credit availability, Government intervention.