Does the Adoption of Digital Payment Improve the Financial Availability of Farmer Households? Evidence from China

Digital finance carries the expectation of achieving inclusiveness. The purpose of this paper is to explore how digital finance can improve the financial availability and the extent to which digital finance can improve the financial availability of farmer households. Based on micro-rural survey data in China from 2017 to 2019, employing the Cov-AHP weighting method, this study measured the index of financial availability (IFA) of farmer households in terms of three dimensions: investment, bank loans, and private finance. We analyzed the mechanism of how digital payment adoption affects the IFA of farmer households based on the Long Tail Effect theory of Anderson. Ordinary least squares method and ordered probit model was constructed to empirically test the impact of payment adoption on the IFA of farmer households. The research results show that (1) the IFA of Chinese rural households is still at a low level; (2) while the availability of investment is very low, the availability of bank loans is relatively high; and (3) the adoption of digital payment has a positive impact on improving the IFA of farmer households, including the availability of investments, bank loans, and private finance. The results are robust to model misspecification and reverse causality. The evidence also suggests that the adoption of digital payment mainly affects the financial availability of farmer households through information effects. Therefore, attention should be paid to broadening information channels and promoting the adoption of digital payments to improve financial access for farmer households. This study contributes to the comprehensive understanding of the financial situation of households by constructing a financial availability indicator system from three dimensions. By analyzing the impact of digital payment adoption on farmers' financial availability, this study helps to understand how digital finance can play a positive role in farmer households' financial conditions.