Impact of E-Commerce Adoption on Farmers’ Participation in the Digital Financial Market: Evidence from Rural China

Abstract

Although the increasing adoption of digital finance in recent years has exerted a wide-ranging influence on farmers’ consumption and production activities, many farmers in China still seriously suffer from digital financial exclusion. Few studies have documented the different impacts of e-commerce adoption characterized by online purchases and sales on farmers’ participation in the digital financial market measured by their engagement in digital payments, digital wealth management, and digital credit in rural China. Using survey data from 832 entrepreneurial households in rural China, we contribute to the literature by confirming that both online purchases and sales have a robust significant and positive impact on farmers’ participation in the digital financial market and that this impact on digital wealth management is successively larger than that on digital payments and digital credit, with the propensity score matching (PSM) method and instrument variable (IV) approach employed. We further discover that the impact of online purchases and sales on farmers’ participation in the digital financial market is significantly mediated by digital financial literacy. Moreover, the impact of online purchases and sales on farmers’ participation in the digital financial market is larger for those with high education levels, pursuing skills training, running new agricultural operation entities (i.e., family farms, professional cooperatives), and engaging in agricultural entrepreneurship. Our findings suggest that more effective measures to enhance adoption rates of online purchases and sales, innovation in rural market-oriented digital financial products and services, systematic training for farmers in e-commerce skills as well as digital financial literacy, and differentiated support measures for different groups of farmers to reduce the gap are urgently needed in China.