Digital Financial Inclusion and Income Stratification: Implications for Entrepreneurship and Poverty Reduction

Abstract Digital financial inclusion (DFI) has been widely recognized for its potential role in reducing poverty by fostering entrepreneurship. However, whether DFI benefits all social classes equally remains an open question. Integrating technology adoption and income stratification research, this study investigates the impact of DFI on income stratification – specifically lower-, middle-, and upper-income classes – across key entrepreneurial stages, including venture creation, investment, and performance. Using data from 36,557 household-wave observations in the China Household Financial Survey (CHFS), we find that (1) lower-class households are less likely to establish entrepreneurial ventures compared to upper-class households but are more likely to do so than middle-class households, and (2) they make lower investments in entrepreneurial ventures compared to their upper-class counterparts, and experience lower entrepreneurial performance than middle- and upper-class households. The results also show that, whereas DFI positively influences entrepreneurial venture creation, investment, and performance for lower-class households, these effects are less pronounced compared to those observed in middle- and upper-class households. The study advances an integrated view of DFI by examining its differential impacts across income classes and entrepreneurial stages and contributes to the ongoing debate about its effectiveness as a universal poverty reduction solution.