Journal of Applied Finance & Banking

Can Digital Inclusive Finance better serve the development of the real economy?

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• Abstract

   

  For a long time, the development of financial services for the real economy has faced many dilemmas. However, can the digitalization of finance based on the new generation of information and communication technology solve this dilemma? By combining the CGSS2017 data, the digital financial inclusion data (2011-2018) of Peking University and the 2017 provincial statistical yearbooks, we choose to reflect the development of financial digitization by "whether or not to use WeChat payment/Alipay", and conduct an empirical analysis of the overall and heterogeneity of the impact of financial digitization on entrepreneurial activities. The study finds: (1) digital finance can promote entrepreneurial choice and performance in general, but the differential impact on both shows opposite trends; (2) by testing the mechanism, we find that digital finance eases the information constraint faced by entrepreneurs and improves the regional market environment, but leads to a slight decrease in the maximum loan amount received by entrepreneurs. Further analysis of variance across contexts finds: (1) the marginal effects of digital finance on entrepreneurial choice and entrepreneurial performance are higher in both better institutional contexts than in worse institutional contexts; (2) in both cultural and economic contexts, the facilitation effect of digital finance on entrepreneurial choice is significantly higher in better contexts than in worse contexts, but the opposite effect of digital finance on entrepreneurial performance is found, i.e., the marginal effect is higher in the poorer context than in the better context. The study reveals the complexity and multidimensionality of the impact of digital finance on entrepreneurial activity, and the heterogeneity of entrepreneurial choice and performance, reflecting that digital finance is a "double-edged sword" that can create a "digital divide" while promoting entrepreneurial activity the problem. The analysis of different contexts suggests that building the institutional environment, creating a cultural climate and ensuring macroeconomic stability are key to digital finance for entrepreneurial activities.

  
  

  JEL classification numbers: C36, G10, F35, F37.

  Keywords: Digital finance, Entrepreneurial activity, Digital divide, Digital financialization, Entrepreneurial performance.