The Household Multidimensional Poverty Reduction Effects of Digital Financial Inclusion: A Financial Environment Perspective

The poverty alleviation effects of digital financial inclusion are widely recognized, while these effects are dependent on the financial environment. However, little is known about how the financial environment influences digital financial inclusion, which leads to a reduction in household multidimensional poverty. Using matching data from Peking University Digital Financial Inclusion Index of China and Chinese Family Panel Studies for 2012, 2014, 2016, and 2018, this paper estimates the impact of digital financial inclusion on household multidimensional poverty, considering the financial environment. The results show that: (1) Digital financial inclusion alleviates household multidimensional poverty and has significant alleviation effects on different dimensions of poverty. (2) Digital financial inclusion plays a particularly significant role in reducing household multidimensional poverty in China’s rural areas and central-western regions. (3) Credit availability, social capital, and non-agricultural employment are important channels through which digital financial inclusion reduces household multidimensional poverty. (4) A single threshold effect governs the influence of the financial environment on the impact of digital financial inclusion on household multidimensional poverty. When the financial environment crosses the threshold value, the poverty reduction effect of digital financial inclusion is enhanced. For the components of the financial environment, a single threshold effect governs the influence of both traditional financial foundations and household financial literacy on the impact of digital financial inclusion on multidimensional poverty, whereas government financial supervision does so via a double threshold effect.