THE GREEN TRANSITION AND SME FINANCE: AN EXAMINATION OF CHALLENGES AND FISCAL POLICY

This study analyzes the impact of digital finance on small and medium-sized enterprise (SME) financing during China’s green transition, emphasizing credit accessibility amid changing fiscal policies. Integrating Resource-Based View and Institutional Theory. We investigate how digital finance eases financing limits while encouraging sustainable practices. Using panel data from 8336 Chinese SMEs (2011–2021). We apply fixed-effects regressions and interaction models to evaluate digital financial inclusion’s effects measured by the Peking University Index on credit demand and supply. Results show that digital finance reduces credit constraints, especially for micro and small enterprises, with key factors. Mechanism analysis confirms that digital finance reduces information asymmetry and addresses institutional gaps. Subsample results expose stronger benefits for privatized firms and those in central-western regions. Moreover, digital finance ropes green transitions by boosting green R&D and energy efficiency. This study advances understanding of financing and sustainability, offering policymakers guidance on using digital finance to promote inclusive growth and green industrialization.