Entrepreneurial effects and impact mechanisms of financial inclusion

Abstract

 The development of inclusive finance is crucial for China's overall prosperity, fostering mass entrepreneurship and innovation. This paper utilizes data from 2011 to 2019, including the digital financial inclusion index and China's innovation and entrepreneurship regional index, to construct a fixed-effects model. It empirically examines how digital financial inclusion influences innovation and entrepreneurship. Results show that digital inclusive finance fosters innovation and entrepreneurship among residents, with varying effects across regions, particularly in the East and West. The study explores intermediary mechanisms, revealing that digital inclusive finance enhances residents' entrepreneurial innovation by improving credit quality and scale while reducing non-performing loan balances. However, expanding insurance coverage and digital inclusive financial services may have a substitution effect, weakening the impact of inclusive financial development on innovation and entrepreneurship, especially where insurance coverage is more extensive. Moreover, the paper suggests further investigation into the intermediary pathway linking digital inclusive finance with residents' innovation and entrepreneurship through economic development levels. Enhancing loan quality and quantity is essential to provide entrepreneurs with robust financial support.