Does digital inclusive finance promote agricultural production for rural households in China? Research based on the Chinese family database (CFD)

Abstract

PurposeThe development of digital inclusive finance appears to be able to solve the difficulty of traditional finance, which cannot completely cover agriculture and farmers and provides better financial services and products to Chinese farmers. Thus, it improves the farmers' enthusiasm for agricultural production. The purpose of this paper is to clarify whether this goal is indeed being achieved.Design/methodology/approachThis paper theoretically analyzes the mechanism that influences the effect of digital inclusive finance on rural households' agricultural production decisions and conducts an empirical study based on a sample from the Chinese family database (CFD).FindingsFirst, the development of digital financial inclusion in general can encourage rural households to reduce agricultural production. Second, the negative effect of digital inclusive finance on households' agricultural output is realized by widening the gap between the efficiency of non-agricultural economic activities and the efficiency of agricultural production. The wider the gap is, the lower the enthusiasm of households for agricultural production. Third, the mediating effect of “digital financial inclusion – difference in efficiency – agricultural output” has a significant negative effect on households with low agricultural production efficiency, but not households with high agricultural production efficiency. Digital inclusive finance has no significant effect on the difference in efficiency between the two economic activities of high-efficiency households, but a greater difference in efficiency between the two economic activities corresponds to higher enthusiasm of households for agricultural production.Originality/valueTo the best of our knowledge, this paper is the first to analyze the impact of digital financial inclusion on Chinese farmers' agricultural production. The findings of this study can provide policy-related insights to help local governments promote the development of digital finance in China's agricultural economy.