Inclusive Finance, Farm Households Entrepreneurship, and Inclusive Rural Transformation in Rural Poverty-stricken Areas in China

Financial inclusion is an important part of inclusive rural transformation because it provides access to, and use of, capital to underserved rural households. However, with increased entrepreneurial activities, it begs the question as to the extent by which access to credit actually encourages entrepreneurial activities. Using survey data of 988 farm households in state impoverished counties of China, we find that financial inclusion plays an important role in inclusive rural transformation by facilitating farm households’ entrepreneurial activities in rural poverty-stricken areas in China. The survey provides evidence that the entrepreneurial decisions of farm households are positively affected by use of credit rather than access to credit. In addition, when it comes to entrepreneurial decisions, use of formal credit and use of informal credit have no statistical relationship, but operate under separate and statistically distinct channels. Moreover, entrepreneurship has a positive and significant causal effect on income of farm households.