With the emergence and rapid development of digital technology, a fundamental change has occurred around the world in the financial services industry, especially in terms of the manner in which people engage in the financial market. Digital finance, stemming from the effective integration of digital technology and finance, has gone through impressive development since 2013 in China [1
]. The accelerating development of digital finance has gradually exerted a wide-ranging influence on people’s consumption and production activities in China [2
]; this influence on rural residents in developing countries under a transition economy has recently aroused increasing concern among scholars as well as policy-makers [3
]. In this context, the Chinese central government has given great policy priority to bolster digital finance in rural areas [2
]. In spite of the increasing adoption rate of digital finance in recent years, many farmers in China still seriously suffer from digital financial exclusion [4
], especially in terms of adopting the products and services of digital wealth management and digital credit [5
]. Widespread exclusion from digital finance, which intensifies the Matthew effect of the rural financial market, has become a considerable barrier against the expansion of inclusive finance in rural areas in the digital economy era [7
Little attention has yet been paid to the differences in the adoption of multiple digital financial products among rural residents brought by e-commerce adoption. Consumers’ demographic and socio-economic characteristics, and the regional financial environment, have been the primary focal points of previous research associated with their exclusion from individual digital financial products or services [8
]. These discussions above have been mainly restricted to the traditional offline transaction scenes in the masses’ daily production and life. Indeed, for rural residents, the changes arising from using digital payments, digital wealth management, and digital credit have been increasingly prominent in the era of e-commerce [3
], but the impact of e-commerce adoption on farmers’ usage of multiple digital financial products has been rarely discussed in existing studies.
Nowadays, the boom of e-commerce is widespread in rural areas in China, and a range of revenues brought about by e-commerce adoption has triggered much attention from scholars [11
]. It is obvious that innovations in digital finance, like online payment technology, provide indispensable support for the effective functioning of e-commerce [4
]. It also can be seen that the diffusion of e-commerce inevitably involves many financial issues with regard to payment transactions, credit accessibility, and capital management [15
]. However, few studies have explored whether the e-commerce adoption for both online product sellers and purchasers can effectively relieve their exclusion from and increase their participation in the digital financial market, particularly in regard to digital wealth management and digital credit. Quantifying the causal relationship between farmers’ adoption of e-commerce and digital finance empirically faces challenges caused by omitted unobservable variables, sample self-selection, and reverse causality with cross-section data used. Therefore, with the propensity score matching (PSM) method and instrument variable (IV) approach employed to identify the causality and address endogeneity bias, we investigate whether e-commerce adoption by farmers drives their usage of multiple digital financial products. How does such an impact takes place, and which groups of farmers divided by their characteristics (e.g., education levels, skills training experience, occupation type) are most affected?
A comprehensive and adequate assessment of the impact of e-commerce adoption on farmers’ engaging in the digital financial market would not be accomplished without distinguishing the difference between online purchases and online sales [16
]. Previous studies have primarily observed the effects of consumers’ online purchases, which include a lower degree of information asymmetry, less time and labor costs for transactions, and more economic benefits for the purchasers [17
]. Meanwhile, some studies have highlighted the influence of producers’ online sales, which involve wider sales channels, a greater sales volume, and more sales flexibility for the sellers [19
]. In view of the distinct differences between online purchases and online sales in essence [20
], the difference between their impacts on the use of multiple digital financial products or services cannot be ignored. Additionally, due to the fact that purchasing the means of production and selling products are the two most critical and common economic activities infiltrating farmers’ entrepreneurship, it, therefore, makes more sense to concentrate on the relationship between entrepreneurial farmers’ e-commerce adoption and their usage of multiple digital financial products [21
]. A farmer was defined as an entrepreneur if he or she established and was engaged in one of these activities: small handicraft operations, enterprise operations, farm operations, cooperative management, business services, etc.
Indeed, the use of digital financial products and services might be directly or indirectly related to transactions on e-commerce platforms. Digital payment services, such as WeChat, Alipay, and Bestpay, have become the main tools for farmers’ online transactions and consumption [3
]. Moreover, digital wealth management resources, like Yu’e Bao, and apps about insurance, securities, and funds are effective management tools that benefit farmers’ capital reserves, liquidity management, and property appreciation [2
]. Digital peer to peer (P2P) lending providers, for instance, Jing Dong Dai and Wang Nong Dai, and consumer loan products, like Ant Huabei and Jingdong Baitia, are becoming increasingly popular in China, as they provide important capital for farmers’ production and operations [22
]. Jing Dong Dai and Jingdong Baitiao are provided by Jingdong Finance; Wang Nong Dai and Ant Huabei are provided by Alipay. Studies have suggested that conducting transactions online can facilitate the accumulation of internet knowledge and financial literacy for purchasers [23
], which benefits for individuals’ financial market participation [21
]. Therefore, we assume that digital financial literacy, reflecting a comprehensive level of consciousness, knowledge and ability related to digital finance in individuals’ human capital, would be a potential pathway through which e-commerce adoption stimulate farmers’ usage of digital financial products.
Our study aimed to ascertain the impact of e-commerce adoption on rural residents’ participation in the digital financial market and explore possible pathways for enhancing the inclusion of digital finance, which would provide useful suggestions for other developing countries. In general, our study contributed to the existing research in the following ways. First, rather than discussing general internet users and individual supplier and demander sides of online products, we concentrated on rural entrepreneurial farmers and emphasized both sellers’ and purchasers’ adoption of e-commerce and participation in the digital financial market. We elucidated the general and differential influence mechanism of e-commerce adoption characterized by online purchases and sales on farmers’ usage of multiple digital financial products. Second, taking potential endogeneity problems caused by sample self-selection bias, omitted unobservable variables, and reverse causality into consideration, we employed both the PSM method and IV approach to empirically dissect the different impacts of e-commerce adoption on farmers’ usage of digital payments, digital wealth management, and digital credit. Third, we shed light on the mediation effects of digital financial literacy on the relationship between online purchases as well as online sales on farmers’ usage of different digital financial products and services using mediation model. The heterogeneous effects across individual and family characteristics of farmers were taken into account.
The rest of this paper is organized as follows: Section 2
presents a review of previous literature on the topic as well as the hypotheses to be tested. Section 3
introduces the empirical strategies employed in the research. Section 4
describes the data and main variables considered. Section 5
presents and discusses the empirical results and is followed by the conclusions and implications in Section 6
4. Data and Variables
4.1. Data Source and Descriptive Statistics
Our data were based on a questionnaire survey conducted through face-to-face interviews in 2018 in rural China. Multi-stage cluster sampling procedures were performed. First, three provinces in the eastern and western parts of China were selected by taking the development of e-commerce and digital inclusive finance into consideration. Second, nine counties or districts in the selected provinces were selected by considering their development of e-commerce, geographical environment, and economic status. We selected three representative counties (Fuping, Pingluo, and Qingzhou) with higher levels of e-commerce activities, three representative counties (Nanzheng, Tongxin, and Shen) with average levels, and three counties (Gaoling, Shapotou, and Yinan) with poor levels. Fuping, Nanzheng, and Gaoling are located in Shaanxi; Shapotou, Tongxin, and Pingluo are located in Ningxia; and Shen, Qingzhou, and Yinan are located in Shandong. Third, three or four representative towns reflecting different economic levels were extracted from each selected county or district. From these, two or three representative villages were selected based on the same principle. Fourth, 15 to 20 rural households (mainly the decision-makers in economic activities) were selected from each selected village to interview. Prior to conducting the survey, we scouted various regions and tried to consult local town and village leaders, the staff of financial institutions, and the farmers.
Our research group selected 2000 farmers for interview. However, a small number of farmers directly refused to answer our questions or just finished part of the questions, resulting in many vacancies in the questionnaire items. After excluding the above observations with much missing data or outliers, we obtained 1947 valid questionnaires coming from 105 villages in 36 towns, nine counties (or districts), and three provinces. The representativeness of our sample is described as follows: firstly, according to the Report of Peking University Digital Inclusive Finance Index (2011~2018), Shandong, Shaanxi and Ningxia provinces were the representative provinces with high, average, and low development level of digital inclusive finance in China, respectively. In addition, the 42nd Statistical Report on the Development of China’s Internet showed that, as of June 2018, the proportion of using digital payment for Chinese Internet users increased to 78%, while the utilization rate of digital wealth management increased to 21%. The 42nd Statistical Report on the Development of China’s Internet can be accessed at http://www.cac.gov.cn/2018-08/20/c_1123296882.htm
, accessed on 20 April 2021. The proportions of using digital payment and digital wealth management in our sample were 75% and 23%, respectively, which were in line with the results of the above report. Secondly, Shaanxi and Ningxia were the representative provinces of the growth-oriented e-commerce development mode (relatively fast growth rate but low level), while Shandong was the representative province of the relatively mature e-commerce development mode (relatively high level but slow growth rate) (The 2018 Report of China’s E-commerce Development Index can be accessed at http://www.lifangwang.net/detail.php?aid=145
, accessed on 20 April 2021). Thirdly, our sample set covers agricultural ecosystems varying with different geographic environments, such as the Guanzhong Plain, Mountainous Area of Southern Shaanxi, Loess Plateau, and North China Plain, which means the use of e-commerce and digital finance by farmers and entrepreneurial activities of farmers may present regional differences. Based on the aforementioned reasons, our sample can fairly reflect good representativeness at the national level. As mentioned previously, considering that production and sale activities are the two most critical and common economic activities for farmers’ entrepreneurship [21
], we focus on the online purchases and sales of entrepreneurial farmers rather than general farmers. We divided the sample into entrepreneurial farmers and non-entrepreneurial farmers. Agricultural and non-agricultural entrepreneurship were included in farmers’ entrepreneurial activities. Agricultural entrepreneurship refers to agro-economic activities, such as scale management or start-ups of new businesses or new organizations (e.g., family farms, professional cooperatives, and enterprises), in traditional agriculture, such as plantations, aquaculture, forestry, and fisheries. Non-agricultural entrepreneurship refers to the establishment of businesses in industrial sectors, such as processing, manufacturing, and construction, or engagement in non-agricultural economic activities in service industries, such as specialized services for agricultural production, retailing, wholesaling, accommodation, transportation, housekeeping, culture and entertainment, or medical and health services. Thus, an entrepreneurial sample of 832 was used for analysis. The samples from Shaanxi, Ningxia, and Shandong accounted for 37.92%, 36.23%, and 25.85% of the full entrepreneurial sample, respectively.
4.2. Dependent Variable
The dependent variable was farmers’ participation in the digital financial market, which was mainly measured by digital payments, digital wealth management, and digital credit. We asked every interviewee the following questions: “Have you used WeChat, Alipay, Tenpay, Bestpay, or other third-party payment software to conduct capital transactions?”; “Have you participated in P2P platforms as an investor, used Yu’e Bao, or invested insurance, securities, funds, etc. through apps?”; and “Have you participated in P2P platforms as a borrower, used small loan products (Jing Dong Dai, Wang Nong Dai, etc.) to obtain loan funds, or used consumer loan products (Ant Huabei, Jingdong Baitiao, Weipinhua, etc.) to realize consumption and pay by installment?” According to the answers to the above three questions, we successively identified farmers’ participation behaviors with respect to digital payments, digital wealth management, and digital credit.
As reported in Table 1
, 75% of the respondents used digital payments, 23% used digital wealth management, and 10% used digital credit. Along with the popularity of WeChat and Alipay in rural China, digital payments are increasingly widely used by farmers. Meanwhile, due to farmers’ perceived riskiness of the digital financial market and limited knowledge reserve about digital finance [5
], their participation rates in digital wealth management and digital credit were generally low. This is generally consistent with the statistic that only 7.60% and 11.10% households in China have access to credit and wealth management products online, respectively, in Li, Wu, and Xiao [4
]. Indeed, it is reasonable that entrepreneurial farmers’ participation levels in the digital financial market would be higher than their counterparts, due to more capital transactions, wealth management, and credit demands for entrepreneurs.
4.3. Treatment Variables
The treatment variables were online purchases and online sales in entrepreneurship. To clearly identify farmers’ adoption of online purchases and online sales, we asked the respondents: “Did you use the internet for purchasing raw materials, machinery, and other means of production in your entrepreneurial activities”; “Did you use circles of friends on WeChat, QQ, and other social platforms (e.g., Weibo, Tiktok, Kwai) for selling products in your entrepreneurial activities?”; and “Did you use websites for selling products in your entrepreneurial activities?” If the answer for the first question was “yes,” the respondent was classified as an online purchaser. If at least one of the answers to the last two questions was “yes,” the respondent was classified as an online seller. As shown in Table 1
, 23.47% of the sample took part in purchasing online, while 35.50% of the sample took part in selling online. As one statistic reported, the number of e-commerce users in rural China in 2019 reached 230 million, accounting for approximately 35% of the total rural population (this can be obtained from the Report of China Rural E-commerce Market, http://www.100ec.cn/zt/2019ncdsbg/
(accessed on 20 April 2021).). This implied that purchases and sales online have become an important supplement to traditional offline channels. Furthermore, through the means comparison (see Table A1
of Appendix A
), we can preliminarily judge that those farmers who adopted online purchases or sales were more inclined to take part in the digital financial market.
4.4. Channel Variable
Farmers’ digital financial literacy was selected as the channel variable, which affected individuals’ perceptions of and intentions towards the products and services in the digital financial market. Previous studies have mainly used items related to interest rates, inflation, and risk diversification to measure individuals’ financial literacy [21
]. With reference to the above research, we measured farmers’ digital financial literacy using six questions (as reported in Table 1
), which emphasized interest rates, mortgage and guarantee requirements, credit, transaction cost, and financial security in the digital financial market. We calculated the respondents’ digital financial literacy using a scoring method based on whether answers to each item were correct (“Yes” for each item) or not, with the correct answer being given a score of 1, and other answers a 0. Using equal weights, we then obtained the digital financial literacy score for each respondent, which ranged from 0 to 6. As shown in Table 1
, the average score for the digital financial literacy of respondents was 2.43, indicating a low average level of financial literacy among rural residents in China [3
4.5. Control Variables
Based on the existing literature [8
] and field experience, we controlled for the respondents’ individual characteristics (gender, age, education, risk propensity, internet learning ability, skill training experience, information access, time spent online per week), household characteristics (annual network fee, number of WeChat friends, financial network, new agricultural operation entities, entrepreneurship industry), village characteristics (distance to the nearest town, formal financial institution status, Taobao shops (Alibaba Group in China has cooperated with local governments to establish Taobao stores and service stations in rural areas to promote online products dissemination to the countryside as well as rural products access to the cities), and province dummies variables (Shaanxi, Ningxia). Table 1
presents the detailed definitions and descriptive statistics of the control variables.
From Table 1
, it is clear that 78.22% of the respondents were male and had an average age of 44 years. Half of the respondents had only completed middle school, while 31.64% of them had attended high school or above. In terms of skill training experience, 53.23% of the respondents had taken some kind of training courses on business skills in the past. With regard to risk propensity, 15.45% of the respondents were open to risk, 56.88% were risk averse, and 27.66% were risk neutral. Of the respondents, 30.56% reported poor internet learning ability, while 53.26% believed that they could effectively learn and apply internet knowledge. Moreover, 57.34% of the farmers often obtained economic information from their friends through social platforms, such as QQ, WeChat, and Weibo. The respondents’ average time spent online was 14.53 h per week. Overall, the rural households surveyed paid an annual 727.88 RMB for network fees on average. About 68 friends, on average, were in frequent contact with each respondent on WeChat. Only 18.16% of the households had relatives or friends working at banks or credit cooperatives. Approximately 32.10% of the households were engaged in new agricultural operations, such as family farms, professional cooperatives, and agricultural enterprises. Furthermore, 39.22% of households conducted entrepreneurship in a non-agricultural industry. Regarding the village traits of each study village, the average distance from the selected villages to the nearest town was 5.06 km. The average number of formal financial institutions in each town was two. About 29.25% of the surveyed villages had Taobao shops established by individuals.
6. Conclusions and Implications
Few studies have documented the impacts of e-commerce adoption measured by online purchases and sales when explaining farmers’ digital financial exclusion [5
]. Our results provide a new perspective on the relationship between the e-commerce adoption for both online products demanders and suppliers and their participation in the digital financial market in rural areas. Using survey data on 832 entrepreneurial farmers in rural China, we reveal that both online purchases and online sales have a significant and positive impact on farmers’ participation in the digital financial market. This effect on the usage of digital wealth management is successively larger than that on the usage of digital payments and digital credit. Moreover, the effect of online purchases and sales on farmers’ participation in the digital financial market could be consistently mediated by their digital financial literacy. The results further provide strong evidence for that the impact of online purchases and sales on farmers’ participation in the digital financial market is greater for those with high education levels, pursuing skills training, running new agricultural operation entities, and engaging in agricultural entrepreneurship.
Our study indicates that the driving role of e-commerce adoption both for online products suppliers and demanders on their engagement in the digital financial market should not be ignored in the digital economy era. Our findings also contribute to the literature by elucidating the differential influence of e-commerce adoption characterized by online purchases and sales on farmers’ usage of multiple digital financial products, represented by digital payments, digital wealth management, and digital credit. In addition, our discussion on the impact path of e-commerce adoption on the participation in digital financial market solicits further attention to farmers’ digital financial literacy, and other possible pathways. The heterogeneous effect of e-commerce adoption for different groups suggests that farmers’ participation gap in the digital financial market would be widened caused by e-commerce adoption.
This study provides beneficial practical implications as follows. First, our study suggests that both online purchases and online sales significantly increased farmers’ participation in the digital financial market. In order to relieve farmers’ digital financial exclusion, governments in China are expected to take more effective measures to enhance adoption rates of online purchases and sales technology, in particular for entrepreneurial farmers. Professional and systematic digital education relating to online purchases, online sales, online management, and other related content for different types of farmers is urgently needed for further enhancing their adaptability to new changes in the era of e-commerce. Additionally, the establishment of information support systems, such as internet infrastructure, logistics facilities, and e-commerce service platforms, should be constantly optimized. On the basis of this, the construction of e-commerce demonstration regions and Taobao villages should be continuously promoted.
Second, our findings also demonstrate that the impact of e-commerce adoption on farmers’ usage of various types of digital financial products is different, due to the difference in digital financial demands. Local financial institutions and the internet financial industry in China should actively strengthen the related investigation on different farmers’ requirements of digital financial market participation. It is an increasing trend among rural areas to accelerate market-oriented financial reforms and strengthen function-based regulation to foster the healthy and inclusive development of the digital financial market. The innovative design of digital financial products and services related to investment, wealth management, credit, and relevant intelligent terminals, should be strengthened for accelerating the digital financial inclusion in rural areas.
Third, more attention should be paid to the mediation role of digital financial literacy in the relationship between farmers’ online purchases and sales and their participation in the digital financial market. Government departments, financial institutions, schools, and social education resources in China should be actively encouraged to strengthen their systematic training of farmers’ financial knowledge, especially in the form of digital financial literacy. Moreover, farmers’ trust levels in the digital finance should be enhanced by promoting their overall digital financial literacy.
Fourth, our study further reveals that the effects of online purchases and sales on farmers’ adoption of digital payment, digital wealth management and digital credit vary across individual and family characteristics. The differences among farmers regarding education levels, production and operation types, and organizational forms should be fully considered when optimizing the supply of digital financial products and services. More effective measures should be taken to encourage more farmers to actively participate in skills training, expand their operation scale, and engage in new types of agricultural business entities. In order to reduce the gap in the usage of digital finance among farmers with different characteristics, more assistance should be given to the disadvantaged farmers.
Limitations still exist in this study, which drives us to pay attention to the improvement in aspects of sampling, empirical data, methods and impact mechanism in our future research. First, our study only used the survey data of farmers from three provinces of China for empirical analysis and was a lack of the survey of provinces from central China, which weakened the generalization of the research conclusions to a certain extent. To generalize our findings, we would conduct survey in central provinces and expand the sample to other provinces. Second, the cross-section data we used cannot capture the changes of participation decision in the digital financial market before and after e-commerce adoption, so there are obvious limitations in causality identification. Hence, we would try to establish panel data through longitudinal survey for further study. Third, we just tested the mediation effect of digital financial literacy when exploring the mechanism by e-commerce adoption affects farmers’ participation in the digital financial market. In future studies, we would discuss other pathways such as online social networks, income, and financial demand to extend our study.
It is worth noting that the epidemic of COVID-19 has a great impact on China’s agricultural production, sales, capital liquidity and the sustainability of small and micro enterprises in a certain period, but it also accelerates the digital transformation of the whole agricultural industry chain [54
]. Since agriculture is the basic industry of China’s national economy and has the characteristics of weak industry vulnerable to natural risks and market risks, the improvement of the adoption rate of farmers’ e-commerce and participation degree of digital financial market will help to continuously improve the elasticity and efficiency of agricultural production. In the context of fighting against COVID-19, more and more farmers, especially entrepreneurial farmers, are actively using online purchase and sales technology to reduce information asymmetry and ensure the orderly operation of production and operation. This will also further promote farmers’ participation in the financial market from offline to online. Therefore, in further studies, it would be meaningful to explore the impact of COVID-19 on farmers’ e-commerce adoption and participation in the digital financial market.