Digital microloan based on mobile payment and financial inclusion: Evidence from micro merchants

Using a unique dataset of micro merchants from a leading Chinese Fintech company, we investigate why digital microloans based on mobile payments have experienced explosive growth in emerging economies. Our empirical analysis shows that active mobile payment users are more likely to access microloans, secure larger credit amounts, and benefit from lower interest rates. The effects are more pronounced among merchants operating in regions with lower banking competition, smaller business scales, or shorter operating histories—highlighting the role of platform-based financial inclusion. Importantly, the mechanism analysis is consistent with the interpretation that credit information embedded in the payment footprint is used in credit assessment by revealing the credit quality and complementing traditional information. Furthermore, we find that digital microloans are positively associated with the business performance of micro merchants. These findings offer valuable policy insights for emerging economies with limited financial infrastructure and credit evaluation systems.