Digital Inclusive Finance, Rural Loan Availability, and Urban–Rural Income Gap: Evidence from China

Reducing the urban–rural income gap stands as a pivotal factor in attaining sustainable economic development. Policymakers and researchers have focused on whether digital inclusive finance can narrow the urban–rural income gap. Utilizing provincial-level panel data from 31 regions in China, this paper empirically tests the impact of digital inclusive finance on the urban–rural income gap across different areas of China, specifically analyzing the mediation effect of rural loan availability. The findings indicate that (1) the expansion of digital inclusive finance can enhance the inclusiveness of financial services in rural areas and narrow the urban–rural income gap; (2) the effect of digital inclusive finance on the urban–rural income gap exhibits regional heterogeneity; (3) the rural loan availability has a mediation effect on the urban–rural income gap, but its growth will weaken the narrowing effect of digital inclusive finance on urban–rural income gap; and (4) the reduction in the urban–rural income gap attributable to digital inclusive finance exhibits a nonlinear relationship with the level of urbanization. This paper recommends guiding the digital transformation of rural financial institutions and enhancing farmers’ financial literacy to increase the availability of loans in rural areas. Furthermore, implementing region-specific policies and regulations could effectively narrow the urban–rural income gap.