Digital Inclusive Financial Development, Financing Constraints and Shadow Banking by Non-Financial Firms

Shadow banking by non-financial enterprises is outside the banking regulatory system, and its scale is expanding, posing a threat to China's financial stability and security. The development of digital inclusive finance can help restrain its blind expansion, and this restraint is mainly reflected in two effects: firstly, the ‘technological’ and ‘inclusive’ nature of digital inclusive finance has a direct restraint effect on the shadow banking business of non-financial enterprises; secondly, the digital inclusive finance has a direct restraint effect on the shadow banking business of non-financial enterprises; secondly, the digital inclusive finance has a direct restraint effect on the shadow banking business of non-financial enterprises. First, the ‘technological’ and ‘inclusive’ nature of digital inclusive finance has a direct inhibitory effect on shadow banking of non-financial enterprises; second, the development of digital inclusive finance has an indirect inhibitory effect by reducing the financing constraints of SMEs, thereby reducing the demand for shadow banking of SMEs in the region. Further heterogeneity analysis shows that the inhibitory effect of digital inclusive finance on shadow banking is more pronounced in enterprises with a low degree of digital transformation, suggesting that digital inclusive finance enhances the information transparency of enterprises, and also facilitates their seamless connection with the formal financial system, thus reinforcing the inclusive nature of digital finance.