|
|
|
| Digitalization of Financial Infrastructure and the Development of Inclusive Finance: Evidence from Accounts-Receivable Financing |
| HE Haonan, PENG Lingling, LI Mai, CHEN Zefeng, LIU Xiaolei
|
Guanghua School of Management, Peking University,
Credit Reference Center, The People's Bank of China |
|
|
|
Abstract This study investigates how digital transformation of financial infrastructure can alleviate long-standing financing constraints faced by micro, small, and medium enterprises (MSMEs) in China. As inclusive finance and digital finance are elevated to national priorities under China's financial reform agenda—highlighted in the Central Financial Work Conference and recent State Council guidelines—this research provides timely empirical insights into how digital innovation within financial institutions can enhance credit access for financially constrained firms. The focus of this research is on the People's Bank of China's Accounts Receivable Financing Service Platform (ARFSP), a centralized digital infrastructure that facilitates receivables-based collateral lending in supply chains.
Traditionally, MSMEs have struggled to access formal credit markets due to their lack of fixed assets, limited credit histories, and informational opacity. The ARFSP was initially launched in 2013 to address this issue by improving receivables transparency and enabling supplier firms to pledge accounts receivable to secure loans. While the early phase relied heavily on manual data upload and verification by core firms, the platform underwent a digital upgrade in 2016 that allowed for real-time system-to-system (S2S) integration with core enterprises' ERP systems. This innovation enabled automated, authenticated transmission of transaction data between firms and financial institutions, significantly reducing the cost and frictions of receivables verification, which in turn lowered the barrier to bank financing for suppliers.
Using detailed loan-level and firm-level data from the ARFSP between 2014 and 2022, the study empirically evaluates whether this digital infrastructure enhanced access to finance and improved loan terms for MSME suppliers. A difference-in-differences strategy exploits the staggered adoption of the S2S integration among core firms, comparing outcomes for suppliers associated with digitally connected firms to those still using the manual mode or not participating in the platform. To strengthen identification, the analysis further incorporates propensity score matching and triple-difference models. The findings show that digital connectivity significantly increases both the number of suppliers obtaining loans and the total loan volume extended through the platform. Importantly, the allocation of credit shifts toward smaller firms: account receivables of MSMEs rise in both frequency and value share. Moreover, the new loans enabled by digital connectivity are more inclusive in design—smaller in size, longer in duration, and lower in interest rates—thus directly aligning with the goals of inclusive finance.
These financial improvements are accompanied by tangible enhancements in business performance. Suppliers connected through digitally integrated core firms exhibit better liquidity management, lower debt service costs, and stronger sales and profitability. The benefits are not confined to suppliers alone: core firms also experience gains in revenue and financial resilience, likely reflecting improved operational efficiency and supply chain coordination. Such results provide rare micro-level evidence that digital financial infrastructure can produce win-win outcomes across supply chain tiers, particularly in ecosystems involving resource-constrained firms. This reinforces theoretical arguments that public infrastructure for information sharing can act as a collective good, reducing credit frictions and enhancing allocation efficiency in financial markets.
The mechanism analysis further reveals that, on the one hand, the S2S connection significantly reduces the cost of uploading and processing account receivables data—an efficiency advantage that becomes particularly prominent for core firms with extensive supplier networks. On the other hand, in regions where bank lending is more constrained, the financing facilitation brought by digitalization is especially pronounced, underscoring its potential to improve the geographic distribution of credit and promote more balanced regional development. These insights highlight how digital infrastructure not only addresses information frictions at the firm level, but also functions as a policy lever for achieving broader spatial equity in credit allocation.
The study contributes to multiple academic literatures. Within supply chain finance, it highlights the role of institutional infrastructure—beyond inter-firm contracting—in shaping financing dynamics. In the financial intermediation and development literature, it empirically validates how information systems can reduce credit risk, extend lending horizons, and promote inclusive finance. Furthermore, by leveraging detailed administrative data and advanced causal inference techniques, the research sets a methodological benchmark for evaluating policy innovations in financial markets. Notably, the findings suggest that digital transformation of financial infrastructure should be treated as a core component of inclusive finance strategy, rather than a supplementary tool.
Policy implications from this research are clear and actionable. Authorities should accelerate the adoption and integration of digital platforms like the ARFSP, especially among large core firms with extensive MSME supplier networks. Financial regulators may consider offering technical or fiscal incentives to encourage ERP integration with national platforms. Equally important is the need to promote a narrative of mutual benefit around data sharing, as many core firms remain hesitant to expose transaction-level data. The study shows that such sharing not only benefits MSMEs but also improves the financial performance of the core firms themselves, creating a virtuous cycle that strengthens supply chain resilience.
This research opens avenues for comparative studies across different country contexts, especially in emerging markets where digital financial infrastructure remains underdeveloped. Future work could also examine the broader spillover effects of such platforms, including labor market responses and innovation incentives. Additionally, as digital ecosystems evolve, it will be important to understand how firms dynamically adapt their financing behavior, investment strategies, and risk management practices in response to enhanced financial infrastructure. Overall, this study affirms the transformative potential of digital public goods in the financial sector, and underscores their central role in building an inclusive, efficient, and resilient economic system.
|
|
Received: 26 January 2024
Published: 05 April 2025
|
|
|
|
|
|
|
|
