Analysis on the Poverty Reduction Effect of Digital Inclusive Finance: A Case Study in Sichuan Province, China

Abstract

On February 25, 2021, China won an all-round victory in the battle against poverty, and absolute poverty was solved historically. Since then, China's poverty governance will shift to addressing relative poverty. The main objective of tackling relative poverty is to narrow the gap in living standards and alleviate the problem of uneven resource allocation. Financial poverty alleviation, as one of the important ways to alleviate poverty, has been receiving a lot of attention nationwide. With the rapid development of Internet technology and the arrival of the era of big data, the financial system has moved into the era of digital inclusive finance. With its low cost, wide coverage and high efficiency, digital inclusive finance contributes to the battle against poverty and the advancement of financial development. Sichuan Province has experienced rapid economic development in recent years, but the problems of unbalanced urban and rural development and relative poverty still exist. Therefore, it is of great practical significance and academic value to study the poverty reduction effect of digital inclusive finance in Sichuan Province, in order to better consolidate the poverty reduction results and promote the harmonious socio-economic development of Sichuan Province. Based on this, this paper analyses the current situation of poverty and the development of digital inclusive finance in Sichuan Province, and also makes a theoretical analysis of the mechanism of the poverty reduction effect of digital inclusive finance. The indicators that affect poverty, such as the level of economic development, government expenditure, industrial structure, urbanisation level, opening-up level, urban-rural income gap, and digital inclusive finance index were selected to form an indicator system, and panel data were collected for 21 prefecture level cities in Sichuan Province from 2011 to 2020. The impact of digital inclusive finance on poverty alleviation is directly analysed through a fixed effects panel regression model, then the relationship between digital inclusive finance, the level of economic development and the urban-rural income gap is investigated through a mediated effects model, and finally the interaction between digital inclusive finance and targeted poverty alleviation policies is empirically analysed using interaction effects model. The study found that digital inclusive finance not only directly alleviates poverty in Sichuan Province, but can also indirectly influence the poverty level through the improvement of economic development level and urban and rural income distribution, and that the implementation of the targeted poverty alleviation policies make digital inclusive finance more effective in reducing poverty. Accordingly, this paper makes corresponding suggestions from three aspects: firstly, to promote the role of digital inclusive finance in addressing farmers' poverty by strengthening the infrastructure of digital inclusive finance in poor areas, expanding the popularity of digital financial knowledge and improving the corresponding application capacity; secondly, to indirectly promote the poverty-reducing role of digital inclusive finance by improving the urban-rural income distribution gap on the premise of maintaining economic growth; and thirdly, to strengthen the in-depth integration of digital inclusive finance and poverty reduction policies.