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Local Bank, Digital Financial Inclusion and SME Financing Constraints: Empirical Evidence from China

Author

Listed:
  • Zhiqiang Lu
  • Junjie Wu
  • Hongyu Li
  • Duc Khuong Nguyen

Abstract

This paper investigates the impact of local banks and digital financial inclusion on small and medium enterprise (SME) financing constraints. Using data of Chinese SMEs for the period 2007?2017, our robust results find (1) SMEs financing constraints are negatively associated with the proportion of local bank branches and the degree of digital financial inclusion; (2) the effect of local banks is more pronounced for small, transparent, and firms in the regions less dependent on bank credit; and (3) local bank branches and digital financial inclusion have a substitution effect on alleviating SMEs financial constraints. The findings shed light on how digital finance technologies could influence traditional SME-bank relationship and have important policy and managerial implications.

Suggested Citation

  • Zhiqiang Lu & Junjie Wu & Hongyu Li & Duc Khuong Nguyen, 2021. "Local Bank, Digital Financial Inclusion and SME Financing Constraints: Empirical Evidence from China," Working Papers 2021-008, Department of Research, Ipag Business School.
    • Handle: RePEc:ipg:wpaper:2021-008
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    Keywords

    local banks; digital financial inclusion; financing constraints; SMEs; China.;
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