Impact and Mechanisms of Digital Inclusive Finance in Relation to Farmland Transfer: Evidence from China
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1. Introduction
Land is a vital resource for agricultural development and a critical factor in the lives of farmers. The household contract responsibility system implemented in China in the last century fully mobilized the enthusiasm of farmers for production, greatly promoted agricultural productivity [1,2], stabilized and promoted economic and social development, and made major contributions to China’s agricultural growth. However, because of the advancements in agricultural production technology and the shift in labor to secondary and tertiary industries, small-scale farming has led to low comparative benefits in agriculture and the abandonment of cultivated land. This phenomenon has become increasingly serious. This situation poses a serious threat to sustainable agricultural development and food security. The contradiction between China’s agricultural modernization goal of improving agricultural productivity and the current situation is increasingly evident. Agricultural land management on a large scale has the potential to decrease the cost of land operations, establish economies of scale [3], and support the sustainable growth of agriculture. Therefore, the Chinese government proposed the “appropriate scale management of agriculture” and the land reform policy of the “separation of three rights” (namely, ownership, contract rights, and management rights) to enhance land resource efficiency, comparative agricultural benefits, total factor productivity, and, ultimately, sustainability in agriculture.
Subsequently, the Chinese government actively promoted and enhanced the land transfer system to achieve these goals. Relevant policies and regulations have been implemented to facilitate the transfer of agricultural land. Under strong promotion by the Chinese government, the scale of farmland transfer in China has grown rapidly. Farmland transfer has gradually become an effective means of solving the problem of abandoned cultivated land, an important way to realize large-scale agricultural management, and an inevitable trend in the high-quality development of agriculture. However, the marketability of agricultural land in China is low compared to the urgent need for intensive land use [4], which has restricted the scale and efficiency of farmland transfer to some extent. Therefore, finding new driving forces to promote rural land transfer is the main focus of future research. Existing scholars have studied various aspects of rural land transfer, including the willingness to grow nonfood crops [5], property rights systems [6], agricultural green total factor productivity [7], agricultural labor [8], agricultural socialized services [9], agricultural resource endowments [10], land tenure clarification [11], financial literacy [12], subsidy policies [13], land lease agreements [14], agriculture-related loans [15], and agricultural household start-ups [16]. In fact, the most important factor limiting farmland transfer is the shortage of disposable funds for farmers. The main sources of funding are endogenous family income and exogenous financial support. Endogenous factors have a significant impact on farmland transfer [17], while exogenous financial support, which is reflected in credit availability, also has a significant impact on farmland transfer [18]. The development of rural finance can provide financial support to farmers, increase farmers’ disposable funds, and promote farmland transfer, thereby achieving large-scale agricultural management. At the same time, financial development promotes improvements in people’s living standards and agricultural production efficiency, and promotes economic growth [19,20], thus achieving the goal of agricultural and rural modernization, comprehensively improving various indicators of farmers’ production and living standards. The coupling coordination relationship between financial development and farmland transfer [21] is of great significance for rural economic growth.
Before defining the concept of digital inclusive finance, it is essential to clarify the concept of inclusive finance. As part of financial development, the term inclusive finance was formally introduced by the United Nations in 2005, referring to a financial system that can effectively and comprehensively provide services to all strata of society [22]. Regarding the definition of digital inclusive finance, this study adopted the definition in the 2016 Global Partnership for Financial Inclusion (GPFI) report by the G20 [23]: Digital inclusive finance refers to all actions that use digital financial services to promote inclusive finance. It specifically includes the use of digital technology to provide a range of formal financial services to groups that cannot access or lack financial services. The financial services provided meet their needs and are delivered in a responsible, affordable manner that is sustainable for service providers. Digital inclusive financial services encompass financial products and services, including credit, payments, insurance, and wealth management. These products and services are realized through digital technologies, such as electronic currencies, payment cards, or traditional bank accounts. In the traditional framework of conventional finance, the high risk in agricultural and rural areas has created obstacles to accessing external financing for farmers. In comparison, digital inclusive finance has two advantages. Firstly, it has the advantage of being low cost. The development of digital inclusive finance allows both the supply and demand sides to exchange and transact relevant information through the Internet, further increasing the degree of information openness on the basis of providing selectivity for both parties, which can effectively avoid the transaction costs caused by information asymmetry. Secondly, the coverage of digital inclusive finance is broader. By using new communication tools, such as the Internet, digital inclusive finance can break through the geographical limitations faced by traditional financial industries. Traditional financial service institutions mostly set up relevant businesses in densely populated areas with good economic development, making it difficult in many areas to access the needed financial services. The emergence and popularization of digital inclusive finance have further expanded the scope of services that financial institutions can provide, overcoming geographical and spatial limitations, and expanding their coverage for users. Therefore, digital inclusive finance is a combination of digital communication technology and traditional finance. Through the widespread use of tools such as the Internet and big data, the development of digital inclusive finance effectively alleviates the problem faced by farmers of “difficulty in financing and high financing costs” with traditional finance, allowing credit loans to flow to farmers and rural areas, thereby providing financial support for farmers’ land transfer. In addition, the rapid development of internet technology in China has also provided tremendous help in the promotion of digital inclusive finance. In 2020, China’s internet penetration rate reached 70.4%, and the broadband network coverage rate in poor villages reached 98%. Therefore, digital inclusive finance is a novel financial system that integrates digital technology, leveraging the Internet, big data, and artificial intelligence, with traditional financial systems. The resulting system fosters inclusivity, making financial services accessible to a wider population. It offers appropriate financial services to low-income communities thanks to digital technology, serving as a valuable starting point for the Chinese government’s efforts to implement its rural revitalization strategy, promote the modernization of agriculture and rural regions, and achieve sustainable agricultural development.
In terms of research on digital inclusive finance, the existing literature mainly focuses on the impact of digital inclusive finance on agricultural green total factor productivity [24], farmers’ consumption structure [25], urban–rural income gap [26,27,28], food security [29], labor mobility [30], rural tertiary industries [31], and economic growth [32]. In terms of research on finance and farmland transfer, Shen found that digital inclusive finance promotes agricultural green total factor productivity by promoting farmland transfer [22]. Lei believes that the use of digital finance significantly increases the possibility and proportion of farmland transfer-out [4]. Liu argues that the farmland transfer system has a greater impact on the rural financial development system through the coupling coordination of the farmland transfer system and the rural financial development system, suggesting that the government should increase support for rural financial institutions [21]. Cai et al. tested the impact of digital inclusive finance on farmland transfer from a macro perspective using provincial panel data [33]. Zhang analyzed the impact of digital inclusive finance on farmland transfer from a micro perspective [34].
For farmers, livelihood capital is the foundation for engaging in livelihood activities, serving as a fundamental condition for adjusting livelihood strategies and improving living standards. The sustainable livelihood framework developed by the UK’s Department for International Development (DFID) is relatively typical [35]. The development of digital inclusive finance not only provides a source of funding and credit guarantee for farmers in transferring land but also has multidimensional impacts on farmers’ livelihood capital. This framework categorizes livelihood capital into five types: human capital, natural capital, physical capital, financial capital, and social capital. It describes how households, in the face of risk environments created by markets, institutional policies, and natural factors, utilize a variety of assets, rights, and strategies to enhance their livelihoods. It reflects the interrelated changes and interactions among farmers’ livelihood capital structure, livelihood processes, and livelihood goals. Wang et al. empirically analyzed the impact and mechanism of digital finance’s use on farmers’ diversification upgrades using fractional probit models, and they found that the use of digital finance significantly improves the diversification level of farmers’ livelihoods [36]. At the same time, farmers’ livelihood capital also has a significant impact on farmland transfer [37].
In summary, existing studies have not conducted a comprehensive analysis of the impact of digital inclusive finance on rural land transfer from the perspectives of farmers’ livelihood capital and the digital information effect. Especially in the context of rural revitalization, common prosperity, the construction of a digital China, and the modernization of agriculture and rural areas, the urgency of analyzing the impact and mechanisms of digital inclusive finance on rural land transfer in China becomes increasingly apparent. Therefore, this paper focuses on farmers’ livelihood capital and the digital information effect to study the impact and mechanisms of digital inclusive finance related to rural land transfer. The aim is to provide a new channel for studying the impact path of digital inclusive finance on rural land transfer and, consequently, offer policy recommendations for government departments, financial institutions, and other relevant fields.
On the basis of the Digital Inclusive Finance Index, compiled by Peking University (DIF), and microsurvey data from the China Rural Revitalization Survey, conducted by the Rural Development Institute at the Chinese Academy of Social Sciences (CRRS) in 2020, this paper examined the relationship between digital inclusive finance and rural land transfer from both a theoretical and empirical perspective.
The potential incremental value of this study resides in two areas. Initially, it examines the correlation between digital inclusive finance and rural land transfer. Earlier research has given scant attention to this association. Fundamentally, the influence of digital inclusive finance on the flow of agricultural land is rudimentary. After obtaining loans through digital inclusive finance, farmers primarily involved in agricultural work tend to increase the amount of agricultural land they transfer. This is due to limitations related to knowledge, literacy, and other factors causing them to be more willing to transfer additional land [2]. Farmers who are primarily engaged in nonagricultural employment, on the other hand, show greater interest in transferring their land. Additionally, previous studies focused primarily on farmers’ behaviors or certain aspects while disregarding farmers’ unique endowment conditions. As a result, this approach fails to fully and clearly reveal the internal mechanism and may result in biased results. Digital inclusive finance provides financial support to farmers, and digital technology has created new channels for farmers to access information about production and daily life. Therefore, this study examined the impact and mechanisms of digital inclusive finance related to farmland transfer by focusing on farmers’ livelihood capital and the digital information effect. The aim was to fill the gap in knowledge that exists in the literature. Additionally, previous studies have been unable to provide a clear explanation of the internal impact mechanism of digital inclusive finance related to rural land transfer, and multiple mechanisms may be at play. Therefore, this paper integrated two intermediary mechanisms, the livelihood capital effect and the digital information effect, into a cohesive analytical framework. This expands the multiple action mechanisms between digital inclusive finance and rural land transfer, resulting in a novel approach. The chain intermediary model clarifies the potential connections among various mechanisms, improving the impact mechanism of digital inclusive finance on rural land transfer and making the intermediary channels clearer.
The rest of this paper is arranged as follows: Section 2 provides the theoretical analysis and research hypotheses. Section 3 introduces the data sources, model construction, and index construction for the data, followed by descriptive statistics. Section 4 presents the empirical results and a discussion of the research. Section 5 offers the research conclusions and policy recommendations.
5. Conclusions and Recommendations
5.1. Conclusions
This paper theoretically and empirically analyzed the role of digital inclusive finance in farmland transfer, and the main conclusions are as follows: (1) This paper constructed an indicator system based on farmers’ livelihood capital and measured farmers’ livelihood capital using the entropy TOPSIS method. (2) A mechanism framework of digital inclusive finance → digital information effect → livelihood capital → farmland transfer was constructed. (3) This paper first tested the impact of digital inclusive finance on farmland transfer, and the results were highly significant. (4) The test results of the mechanism demonstrate that digital inclusive finance has the potential to markedly boost agricultural land transfer through the effects of digital information and livelihood capital. The findings also confirm that digital inclusive finance not only reinforces agricultural land transfer through the digital information effect but also through the independent intermediary effect of livelihood capital, and this will have an impact through the intermediary chain of digital inclusive finance → digital information effect → livelihood capital → agricultural land transfer. (5) The heterogeneity test shows that digital inclusive finance has a positive and effective impact on economically developed regions.
5.2. Recommendations
On the basis of the above research conclusions, this paper believes that the positive role of digital inclusive finance in rural land transfer should be valued, and the development level of digital inclusive finance should be improved in the following five aspects, so that inclusive finance can benefit land transfer. Firstly, promote the construction of digital infrastructure in rural areas and accelerate the advancement of the digital countryside strategy. The construction of digital infrastructure is the basic element for the development of digital inclusive finance. However, the digital foundation of most rural areas in China is still relatively weak, especially in economically underdeveloped areas. Therefore, more attention should be paid to the construction of digital infrastructure in underdeveloped areas, and the construction of infrastructure such as internet communication, big data, and the Internet of Things in rural areas should be accelerated. In response, government departments should increase investment in the construction of infrastructure in underdeveloped areas, such as mobile communication, fiber optics, and IoT projects, and use means such as transfer payments and fiscal subsidy policies to promote coordinated development in these regions. At the same time, government departments should actively introduce social capital into the construction of digital infrastructure and establish partnerships through regulation, cooperation, and other means to improve resource allocation efficiency. Finally, government departments should collaborate with social enterprises to jointly develop more efficient and secure financial technology to enhance customer trust [97].
Secondly, it is important to fully activate the inclusive capacity of digital finance to ensure it can benefit all aspects of farmers’ production and daily life. Increasing the promotion of digital inclusive finance and accelerating the digital transformation of traditional financial institutions in rural areas can help improve financial accessibility for farmers. Encouraging banks and rural credit unions to use digital technology to launch financial products and expand their area of business, as well as customizing their financial products for agriculture and rural farmers, aligns with the strategy for the revitalization of the countryside. This will enable financial investment to benefit farmers in a significant way, allowing for the full impact of financial support on farmers’ livelihood capital. This will enable financial investment to benefit small- and medium-scale farmers, as well as new business entities in large numbers.
Thirdly, improve the market-oriented farmland transfer system and innovate farmland transfer transaction methods. First, utilize various relevant transaction service venues, institutions, and platforms to improve the rural property rights transfer transaction system. Second, clearly define entry transaction conditions; enrich entry transaction varieties; improve rules for various transactions; and standardize transaction applications, entrusted acceptance, information announcements, transfer acceptance, organized transactions, transaction termination, organized signing, transaction (i.e., contract) certification, and document management procedures. Third, guide transaction service institutions to strengthen construction of internal controls, strictly regulate financial service behavior, strengthen information system risk prevention and control, and ensure the standardized conduct of rural property rights transfer transactions. Finally, take the development of digital inclusive finance and the market-oriented development of rural land transfer as an opportunity. Establish a big data financial service platform and a land transfer transaction platform, create a long-term mechanism for the organic integration of digital inclusive finance and market-oriented rural land transfer, and promote financial innovation and land transfer system innovation, thereby effectively promoting the development of digital inclusive finance and increasing the rate of rural land transfer.
Fourthly, improve farmers’ financial literacy. It is recommended that the government, educational institutions, and the financial sector design new financial systems and innovative inclusive policies to integrate individual farmers into the financial service system, aiming to cultivate financial literacy among farmers [98]. Additionally, efforts should be intensified to promote digital inclusive finance, conduct policy advocacy, and enhance awareness and accessibility of digital inclusive financial services by lowering the entry barriers for farmers, simplifying the thresholds for using financial products, and encouraging active participation among farmers. By establishing collaborative relationships between government departments and educational institutions, developing a sustainable mechanism for financial literacy education, assisting farmers in learning financial knowledge, fostering financial awareness, and improving financial literacy, this will encourage the use of digital inclusive finance among farmers and, subsequently, drive land transfer.
Fifthly, improve the digital inclusive financial supervision system. The supervision methods for traditional finance should be innovatively adapted to the development of digital inclusive finance, strictly controlling the access qualifications of financial institutions, strengthening technical supervision, improving the supervisory system, and establishing a real-time and dynamic long-term supervision mechanism. Therefore, it is crucial to strengthen the supervision of digital inclusive finance to achieve sustainable development, improve farmers’ living standards, promote rural industries’ prosperity, enhance agricultural and rural areas’ sustainable development, and, ultimately, achieve the rural revitalization strategy.
Finally, in terms of recommendations for management, integrate digital inclusive finance with rural finance effectively. Firstly, guide financial institutions to provide financial services to farmers through new communication tools, such as the Internet and mobile terminals, promoting the orderly development of financial technology and rural finance. Provide innovative financial products and service methods for farmers, forming an effective management service system combining digital inclusive finance with rural finance. Secondly, construct a digital inclusive finance management system based on the four levels of city, county, township, and village. The acquisition of agricultural loans should reduce management levels, optimize loan processes, and establish a standardized service system for farmers’ credit loans, mortgage loans, pledge loans, and other businesses. Finally, implement quantitative assessments of agricultural credit scales for state-owned banks and local banks, promoting the increase in agricultural credit scales through incentives and regulations.
While the results of this study suggest that digital inclusive finance plays an important role in facilitating rural land transfer, it is important to note that these findings are preliminary and that there are certain limitations to this study. The study only used the Digital Inclusive Finance Index to measure digital inclusive finance and its impact on land transfer. Future research should explore the influence of digital inclusive finance on land transfer comprehensively, considering the three dimensions of digital financial coverage, depth of digital financial usage, and the degree of inclusiveness in financial digitization. Future research should explore the influence of digital inclusive finance on land transfer comprehensively, considering the three dimensions of digital financial coverage, depth of digital financial usage, and the degree of inclusiveness in financial digitization. Future research should explore the influence of digital inclusive finance on land transfer comprehensively, considering the three dimensions of digital financial coverage, depth of digital financial usage, and the degree of inclusiveness in financial digitization. This study only included data from farmers and the Digital Inclusive Finance Index from 2020. Future research, using more recent data, could conduct comparative analyses and explore the nuanced impact of digital inclusive finance on land transfer. Finally, this study found that digital inclusive finance has a chain-mediated effect on land transfer through digital information and livelihood capital. However, further exploration is needed to identify other potential mediating variables. Therefore, we will search for potential variables through additional theoretical analyses and empirical investigations.
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